Amidst enormous digital changes in the tax industry, the upcoming 2026 deadline for Making Tax Digital (MTD) for Corporation Tax (CT) has the potential to give tax departments a headache — with no magic pill to cure it. The required changes to VAT and CT data and processes has created a growing desire for dedicated technology to build more efficient and cost-effective operations.
As research from Deloitte indicates that 93 percent of tax functions will be offered the same or a reduced budget over the next three years, senior tax executives are challenged to do more with less. Investing in the right tech and securing the necessary skills is critical to stay compliant, whilst securing and generating business value. New technologies have begun to dominate in an increasingly virtual landscape and, as with any business changes, many struggle to get started and overcome the implementation challenges. Yet, the benefits of embracing these new opportunities far outweigh the initial hurdles.
Pressure is building to embrace the cloud, data integration and smart new technologies that enable real business transformation. Being aware of the latest tech trends enables tax executives to make a shift change in their approach for smarter decision making, compliance and overall success.
The journey to cloud migration
The now-outdated approach of on-premise server-desktop deployment typically amounts to lengthy, expensive partnerships with big legacy vendors, requiring significant upfront investment in both hardware and software as well as costly ongoing maintenance. The desktop approach is also very siloed, with restricted communications between services, applications, and teams. Moreover, relying on a single, monolithic, legacy vendor for multiple functions restricts what is achievable.
As a result, tax teams are increasingly turning to the cloud, investing in a flexible, robust and scalable platform, with zero maintenance requirements and rich features. Best of breed solutions can be built from an ecosystem of existing components, connected via APIs. A dedicated solution can be built in less time, with fewer upfront costs.
This enables organizations to be more agile and deploy faster, whilst empowering teams to share resources and work together more quickly and efficiently. Multiple teams have real-time access to the information and services they need. It removes the risk of duplication of effort that comes when working on siloed desktops and smooths the path to digitization.
With cloud, data is also more secure – all big cloud platforms are fully certified and aware of their regulatory responsibilities, while incorporating best-of-breed security as standard. Most importantly, by eliminating all old servers, cloud technologies have a significantly lower total cost of ownership (TCO) and can improve sustainability. Gone are the maintenance, patches and software update costs as companies only pay a predictable fee for what they use.
The importance of data integration
Disconnected data is the biggest threat to accurate and swift processing of tax returns. In the absence of different departments having visibility of the same financial data, there is no single source of truth, which can cause inaccuracies, errors, delays, and teams doubling up on calculations. With forthcoming quarterly CT submissions required to be sent to HMRC within days of their equivalent VAT filings, the VAT and CT teams must synergize their data for reporting and compliance purposes.
Besides threats of penalties for late returns and MTD for VAT non-compliance, tax teams that aren’t on top of their data estate need to ensure integration is happening as the CT and VAT teams will need visibility of each other’s reporting.
Tax leaders must first revise their siloed approach to CT and VAT and introduce fully integrated tax teams. This will encourage a holistic, transparent view of both disciplines underpinned by a single source of truth, enabling clarity and seamless processes throughout the tax department.
Now that all VAT-registered businesses regardless of size are subject to mandatory online MTD submissions, accounting teams are abandoning Excel in favor of tech that provides a more intelligent approach. The new generation of UK-specific VAT and CT applications ensure faster results, integrate seamlessly with other core IT platforms such as ERP, and automatically update according to the latest regulations.
Modern, best-of-breed financial systems and VAT calculation tools can also generate value beyond meeting MTD compliance requirements, including more precise, timely and transparent data, which enables smarter decision-making and improved business intelligence. For the first time, specialist tax software can also deliver more complex calculations, such as partial exemption, enabling end-to-end MTD for VAT processing and helping companies potentially recover more in VAT than they previously could have, due to their lack of access to accurate data.
Adopting innovative technologies for evolving tax processes
MTD presents a great opportunity to introduce new disruptive technologies, such as Robotic Process Automation (RPA) and Artificial Intelligence (AI), and each can play a key role in MTD processes. RPA software enables ‘bots’ to handle high-volume, repetitive, and rules-based tasks more quickly and accurately than humans, reducing the risk of error. It also frees up junior administrators’ time to focus on more meaningful work, boosting job satisfaction and adding value to the business. Applying AI rules can help tax administrators make quicker and more meaningful decisions based on data shared across the teams.
The cloud, data integration and new proven technologies, such as RPA and AI, all help businesses to meet their tax objectives and enhance and secure their technology infrastructure. Organizations are already reaping the rewards, such as real-time collaboration between locations and organizations, lower TCO; speedier and easier updates; and increased staff motivation and retention.
Technology is reshaping the tax industry
Businesses realize the need to invest in specialist tax software for greater speed, clarity and value for money, while improving the working experiences of employees. By integrating tax departments across VAT and CT and gradually migrating to new and flexible cloud technologies, companies can futureproof themselves for what’s next in their MTD journey. Using all the available data in the most connected, transparent, and accessible way will ensure VAT and CT are synchronized for success.
While the potential of AI and RPA in the tax and accounting industry is still to come, one thing is sure: tax and accounting teams with a tech-first approach embedded in their culture will be quicker to adapt to future change and push their business ahead of its competitors.
Photo credit: Stuart Miles / Shutterstock
Russell Gammon is Chief Solutions Officer at Tax Systems
