Using Special VAT audits, tax authorities generated additional income at companies amounting to EUR 1.53 billion in 2017. Increased efficiency was caused in particular by automated audit processes for value-added tax.

By contrast, medium-sized and small firms often refrain from using automation solutions when preparing VAT returns. They continue to focus on manually recording tax-relevant transactions and complete forms by hand. As such, the error rate is high. In addition, it is frequently the case that preparations in-house are inadequately organised.

Particular guidelines for group entities abroad and overseas VAT records

It is even more significant if German companies generate income abroad. The requirements for tax returns in Belgium, Austria, the United Kingdom and the Netherlands differ greatly from German requirements. Therefore, accurate expertise is necessary to meet all legal requirements relating to overseas VAT records.

This is the case, for example, in the United Kingdom, where from April 2019, as part of the Making Tax Digital initiative, it will only be possible to file a VAT declaration using the corresponding software. It will then no longer be permitted to file declarations manually using the British tax authority's portal.

Electronic submission of VAT returns

Digitalisation provides the solution to manual recording along with the inherent error rate and inadequate internal processes. Our software, VAT-Web, supports your company in preparing its VAT return. VAT-Web has a deadline calendar and deadline early warning system, documents the review process, automatically consolidates independent of the prevailing ERP system in the case of taxable entities, and works seamlessly. In addition, it has a validation centre, which allows it to compare electronic returns and identify deviations at document-line level.

Moreover, the validity of VAT identification numbers is checked. The software for VAT declarations documents all changes and adaptations in an audit-compliant manner and can serve as part of a Tax CMS. In this regard, VAT-Web is not only available in Germany, but also in selected EU member states for the electronic submission of tax returns. Country-specific forms are available in German and English.

The benefits of tax returns by electronic means using VAT-Web:

• Time saving for customers and reduction of manual error sources by means of automation
• Process optimisation thanks to representative function and workflow principle
• Risk mitigation by securing the four-eyes principle
• Improvement of documentation to the tax authorities during the tax audit
• Validation centre (automatic routine checks)
• Deadline monitoring

Special requirements in the UK: Making Tax Digital

The British tax authorities (HMRC) have recognised the shift towards digitalisation and begun implementing this change as of April 2019.

VAT returns now need to be filed via a specific electronic interface. Only certain companies, which have been notified by HRMC, are still able to file via HMRC's online portal up until October 2019. After this transition period, all data need to be transferred directly to the MTD interface of HMRC from the ERP system or by using an intermediary software which needs to meet certain requirements. In doing so, companies must ensure that the data are not entered manually (e.g. using copy and paste) and are not commutable.

In addition to the data for VAT returns, other information such as an overview of open or submitted returns must also be transferred between the ERP system/software and HMRC.

This requirement affects not only companies domiciled in the UK but also non-UK companies which file VAT returns in the United Kingdom.

VAT-Web is certified for the UK Making Tax Digital process. The software communicates directly with the HMRC interface and not only works seamlessly but in an audit-compliant manner. 

You can find further information on VAT-Web here. To order VAT-Web online, follow the link: KPMG Direct Services.