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Businesses unaware and unprepared for major EU VAT overhaul

New research shows digitisation is widely supported, but legislative changes are not being prepared for

Despite the seismic changes set to reshape the VAT landscape over the next three years, new research reveals that the majority of businesses are unaware and unprepared to face them. Accordance VAT finds that some 78% of businesses are unaware of the upcoming EU Four VAT ‘Quick Fixes’ legislation, and less than half (48%) are ready to manage the changes they will bring. Similarly, despite 58% of financial decision makers believing their companies will be affected by Real Time Reporting (RTR) in the next two to three years, almost two in five (38%) state that their businesses are not prepared for the adoption of RTR in the EU.

These findings are contained in a whitepaper entitled ‘The Future of VAT’, released today by international VAT compliance and consultancy practice Accordance VAT. Alongside representative statistical information on the current positions and views of business, the whitepaper contains analysis and insight on the two major processes shaping the future of VAT – legislative change and digitisation.

Digitisation is a major EU objective and is already underway as national initiatives in several member states. Although there is widespread recognition of the impact of RTR, only one in 10 (10%) businesses is currently ready to manage the changes RTR will entail. Despite this, on the whole businesses were positive about digitisation, with three in five (61%) considering data transparency a bonus, and 57% asserting that RTR could generate overall better compliance. However, two in five (41%) of businesses are concerned about the risks involved in submitting inaccurate data and having less time to correct mistakes, and a majority (63%) believe that the complexity of systems poses a serious challenge.

In fact, Accordance finds that a majority of businesses are already acquainted with digital procedures, with 56% filing tax declarations through a RTR system in Europe, and 46% reporting use of an e-voicing solution.

The Future of VAT whitepaper encapsulates information on the EU legislative agenda, providing insight and guidance for businesses on the move towards harmonisation of the VAT system in the European Community. Key to these plans are the introduction of a data driven Mini One Stop Shop (MOSS) for B2C distance sales by 2021, followed by a B2B OSS for intra-EU supplies of goods in July 2022. Prior to this roll out and with the aim of simplifying some of the more complex aspects of VAT procedure, the EU is introducing a Four VAT ‘Quick Fixes’ programme in January 2020.

Rob Janering, Associate Director at Accordance VAT and author of the whitepaper, says: “We’re going to see unprecedented levels of change to the VAT landscape in the coming three years. All involved in finance must work hard to adapt, but there are rewards to be reaped too.”

 “To make the most of these changes, the core steps for businesses on both sides of the channel are to plan early, to invest in technology, and to invest in human expertise. Those who prepare and adapt in advance are likely to enjoy improved compliance and better data transparency – key for effective businesses functioning and successful international trade.”

Interesting comparisons can be drawn between UK and EU based businesses in terms of awareness and preparation for legislative changes; the vast majority (86%) of UK businesses were not aware of the scheduled Four VAT ‘Quick Fixes’, compared to just over half (57%) of EU businesses. Preparedness for the Four ‘Quick Fixes’ reveals and inversion of figures between the UK and the mainland; 71% of EU businesses feel prepared, compared to 71% of UK businesses who report that they are unprepared.

Nick Hallam, Chairman of Accordance VAT, says “VAT is key to securing our shared future, and for it, businesses and governments alike must be ready for digitisation and the sweeping legislative changes shortly to come into force.”

 “Our research shows that on the whole, businesses need to act to ready themselves for the future of VAT and the departure it signals from current practices. Far too many businesses are unprepared in the face of the changes to come – risking both their ability to comply and their bottom lines. Digitisation and EU-wide harmonisation of procedures offer internal benefits like improved productivity, accuracy and the reduction of risk. Crucially, improved compliance goes hand in hand with being a good tax citizen, and is fundamental to the future of the European social project and the services we have come to rely upon.”

 Accordance VAT is holding a series of webinars to help inform and prepare businesses for the range of issues and legislation affecting VAT. The next session will consider the EU’s Four VAT ‘Quick Fixes’, and will be held on July 23rd. For more information, see here.