Making Tax Digital for VAT is all about reducing the potential for error through digitalisation but to truly tackle discrepancies you need to get control over the process.
There are a number of points during the creation of the VAT Return where errors can creep in – source data, calculations, amendments and adjustments are all potential vectors – so to reduce the scope for error you need to increase control using mechanisms that govern these elements of the process.
Today, finance and tax teams devote considerable time to checking and reviewing data. 20% of businesses spend over 50 days a year preparing the Return and 70% are not fully confident in the reliability of their figures. Improving the accuracy of data can therefore generate considerable time savings and provide assurance that the Return is correct first time, lessening the likelihood of HMRC querying figures and instigating an audit.
Anomaly detection and error management
To help make data more reliable we’ve now incorporated anomaly detection and error correction systems into our AlphaVAT software compliance platform. The solution can now detect anomalies in source data allowing the user to make adjustments prior to calculation and submission.
Error management can be used to flag:
- Duplicates across multiple data sources
- Transactions that fall outside the current reporting period
- Unexpected VAT rates in your transaction data (other than 0, 5 or 20%)
- Transactions between entities in VAT groups that should be excluded from the return
Anomaly detection and error management helps flag potential discrepancies right where they are needed, helping prevent errors from being extrapolated across the system. This means it is far easier to spot and correct issues as opposed to before when errors may not have been corrected until much later in the process when they would have had to be traced back to source.
Source and tax data analytics
While anomaly detection and error management take care of the front end ie the ingest of data, the end of the process ie the VAT review can still be laborious. The figures still need to be verified before the Return can be submitted. For this reason we’ve added data analysis to AlphaVAT, enabling the user to carry out trend analysis that can reduce the time dedicated to checking the figures.
Data analytics can be used to:
• Compare current and historic submissions as well as period-on-period payments, helping you to check for unusual deviations/errors
• View data summaries that highlight areas of potential inaccuracy (e.g. blocked, excluded, manual adjustments), allowing you to remove and recalculate
• Gain insights to support forecasting, such as forward liability projections
• Validate data quality and error rates
Source and tax data analytics can be used to look for patterns in your data, helping you both shorten the review process by determining what your Return should look like and inform you of how the company is performing so you have an idea of what your next Return will be.
All new AlphaVAT
In addition to these enhancements we’ve continued to build-out other aspects of AlphaVAT, tackling the trickier elements of tax such as how you automate schemes and methods (even partial exemption special method).
Plus we’ve made sure you can demonstrate your compliance with the digital links mandate, which is critical given that the soft landing will come to an end in April 2021 and with it any leniency HMRC might have shown. AlphaVAT produces fully automated, timestamped audit trails that are digitally linked to prove 100% compliance from source to submission.
If AlphaVAT’s new set of capabilities are of interest we’d be delighted to show you how they can positively impact your VAT process. To book a one-to-one session, please click here.
