Tax

David Duffy highlights the latest VAT cases and discusses recent VAT developments. Irish VAT updates eBrief 48/19 contains links to several new and chapters of Revenue’s Tax and Duty Manual (TDM) concerning VAT. The new chapters primarily concern the VAT treatment of activities of public bodies, and the VAT treatment of certain types of vouchers (see below). Also, there have been updates to several chapters of the TDM to reflect the increase in the VAT rate for certain supplies from 9% to 13.5%, which took effect on 1 January 2019. Public bodies This guidance does not appear to reflect any particular change in Revenue practice in respect of the VAT position of public bodies, but instead seeks to summarise the current position. A public body’s activities are generally outside the scope of VAT where they are undertaken under a power conferred on the public body by any enactment, and the public body is not in competition with private operators in respect of that activity. However, where not applying VAT on the public body’s activities would give rise to significant distortions of competition with private operators, those activities will generally be subject to VAT in the same manner as for private operators. In addition, VAT legislation specifies certain activities that are automatically within the scope of VAT (unless VAT exempt) when carried out by a public body. This includes, but is not limited to, telecommunication services, supplies of water, gas, electricity and thermal energy and transportation of goods. Vouchers New VAT rules in respect of certain types of vouchers, known as single purpose vouchers (SPVs) and multi-purpose vouchers (MPVs) have been in place since 1 January 2019. In eBrief 48/19, Revenue released guidance on the VAT treatment applicable to other types of “vouchers” that do not fall within the meaning of an SPV or MPV. This includes instruments such as stamps (but not postage stamps), coupons, telephone cards, tokens and book tokens (collectively referred to as “vouchers” in the TDM). The guidance sets out the rules that apply to such vouchers in several scenarios, which broadly follow the VAT rules that were already in place before 1 January 2019. In the normal course, no VAT is due on the sale of such vouchers at face value to private customers, and VAT only becomes due when the customer redeems the voucher. However, where the price charged for the voucher exceeds the face value of the voucher, VAT is chargeable at the standard rate (currently 23%) on the difference between the face value and the consideration paid. The sale of vouchers to a VAT-registered person for resale to private consumers (e.g. an intermediary) is liable to VAT at the standard rate (currently 23%) on the payment received. Any future sales of these vouchers by the intermediary, or subsequent intermediaries, is also liable to VAT. No VAT is due on the redemption of the voucher in these circumstances. The sale of a voucher at a discount to its face value is not subject to VAT until the voucher is redeemed. Provided detailed records are kept, the issuer may account for VAT on the discounted sales price received rather than the face value of the voucher. Mandatory e-filing eBrief 068/19 confirms that electronic filing of VAT returns and electronic payments of VAT on Revenue Online Service (ROS) are mandatory for all taxpayers, including new registrations. This has been the case for many years following a phased implementation. EU VAT updates Place of supply on training courses SRF is a company established in Sweden, which provides educational and vocational training to businesses mainly established in Sweden. The courses take place both in Sweden and other EU member states.  The question referred to the CJEU in the SRF case (C-647/17) was whether the place of supply of these training courses was where the business customer was established (i.e. Sweden) or where the course took place. The latter treatment would apply if the service should be classified as ‘admission’ to an educational event, which is an exception to the general place of supply rules for business-to-business services. The CJEU confirmed that the “place of supply” should, in as far as possible, be the place of consumption. Therefore, the CJEU concluded in this case that admission to, and the right to participate in, these training courses should be subject to VAT at the place the courses took place. VAT treatment of  driving lessons In the A&G case (C-449/17), a German driving school sought to treat their driving tuition services in respect of cars and vans as VAT-exempt “school or university education”. However, the CJEU did not agree that VAT exemption could apply in these circumstances and in the CJEU’s view, “school and university education requires the following features: An integrated system for the provision of knowledge and skills relating to a wide and varied range of matters; and The deepening and development of such knowledge and skills by pupils and students according to their progress and their specialisation at the various levels constituting the system. Based on this, the CJEU concluded that driving lessons in a driving school do not fall within the scope of “school and university education”. The CJEU did not consider whether the tuition services could have been treated as “vocational training”, which is a separate heading within the same exemption. The judgment, therefore, largely supports the current Irish VAT position, which treats driving lessons as subject to VAT, except where they are in respect of vehicles assigned to carry at least 1.5 tonnes of goods or at least nine persons (including the driver). David Duffy FCA, AITI Chartered Tax Advisor, is a VAT Partner at KPMG.

EY’s Helen Byrne, Sherena Deveney and Brendan McSparran FCA outline the relevant compliance dates for June and July 2019. Republic of Ireland  Relevant dates for companies 4 June 2019 Dividend withholding tax return filing and payment date (for distributions made in May 2019). 21 June 2019 Due date for payment of preliminary tax for companies with a financial year ended 31 July 2019. If this is paid using ROS, this date is extended to 23 June 2019. Due date for payment of initial instalments of preliminary tax for companies (not “small” companies) with a financial year ended 31 December 2019. If this is paid using ROS, this date is extended to 23 June 2019. 23 June 2019 Last date for filing corporation tax return CT1 for companies with a financial year ending on 30 September 2018 if filed using ROS.  Due date for any balancing payment in respect of the same accounting period. Loans advanced to participators in a close company in the year ended 30 September 2018 may need to be repaid by 23 June 2019 to avoid the assessment (on the company) of income tax thereon. A concessional three-month filing extension for iXBRL financial statements (not Form CT1) may apply. For 30 June 2018 year ends, this should extend the iXBRL deadline to 23 June 2019. 30 June 2019 Last date for filing third-party payments return 46G for companies with a financial year ending on 30 September 2018. Latest date for payment of dividends for the period ended 31 December 2017 to avoid Sections 440 and 441 TCA97 surcharges on investment/rental/professional services income arising in that period (close companies only). CbC Reports/Equivalent CbC Reports for the fiscal year ended 30 June 2018 (where necessary) must be filed with Revenue no later than 30 June 2019. 14 July 2019 Dividend withholding tax return filing and payment date (for distributions made in June 2019). 21 July 2019 Due date for payment of preliminary tax for companies with a financial year ended 31 August 2019. If this is paid using ROS, this date is extended to 23 July 2019. Due date for payment of initial instalments of preliminary tax for companies (not “small” companies) with a financial year ended 31 January 2020. If this is paid using ROS, this  date is extended to 23 July 2019. 23 July 2019 Last date for filing corporation tax return CT1 for companies with a financial year ending on 31 October 2018 if filed using ROS. Due date for any balancing payment in respect of the same accounting period. Loans advanced to participators in a close company in the year ended 31 October 2018 may need to be repaid by 23 July 2019 to avoid the assessment (on the company) of income tax thereon. A concessional three-month filing extension for iXBRL financial statements (not Form CT1) may apply. For 31 July 2018 year ends, this should extend the iXBRL deadline to 23 July 2019. 31 July 2019 Last date for filing third-party payments return 46G for companies with a financial year ending on 31 October 2018. Latest date for payment of dividends for the period ended 31 January 2018 to avoid Sections 440 and 441 TCA97 surcharges on investment/rental/professional services income arising in that period (close companies only). CbC Reports/Equivalent CbC Reports for the fiscal year ended 31 July 2018 (where necessary) must be filed with Revenue no later than 31 July 2019. General 30 June 2019 Claims under the VAT compensation schemes for charities for VAT on paid on expenditure in 2018 must be submitted by 30 June 2019. Deadline for FATCA and CRS reporting obligations for 2018. 05 July 2019 Under mandatory reporting rules, promoters of certain transactions may be required to submit quarterly ‘client lists’ in respect of disclosed transactions madae available in the relevant quarter. Any quarterly returns for the period to 30 June are due on 5 July. 30 July 2019 Due date for submission of return and payment of IREF withholding tax in connection with accounting periods ending between 1 July and  31 December 2018. Due date for IREFs to file financial statements electronically (in iXBRL format) with the Revenue in respect of accounting periods ending between 1 July and 31 December 2018. Northern Ireland  Relevant company dates 14 June 2019 For accounting periods beginning on or after 1 April 2019, a company whose augmented profits for the period exceed £20 million (as reduced where required) are referred to as a “very large company”. Very large companies are required to pay all of their corporation tax in instalments during the accounting period. For a 12-month accounting period, the first instalment is due two months and 13 days after the first day of the accounting period and each subsequent payment is due three months after the last. For example, a company with a 12-month accounting period ended 31 March 2020, the instalment payments are due on: 14 June 2019 14 September 2019 14 December 2019 14 March 2020 Each instalment should represent 25% of the company’s estimated corporation tax liability. 30 June 2019 If a company has to comply with Senior Accounting Officer (SAO) regulations, they will need to nominate a SAO and inform HMRC of the individual. A SAO of a qualifying company must provide HMRC with a certificate no later than the end of the period allowed for filing the company’s accounts for the financial year with Companies House. For public limited companies, this is six months after the end of the accounting period, i.e. 30 June 2019 for a company with a 31 December 2018 period end.  For groups that are subject to a corporate interest restriction, a “reporting company” (if desired) must be nominated within six months of the end of that period of account. 14 July 2019 Due date for the first quarterly instalment payment for “large” companies with a period ended 31 December 2019.  Due date for income tax for the CT61 period to 30 June 2019. Personal tax 31 July 2019 First payment on account towards the taxpayers 2018/19 liability is due.   Any 2017/18 tax returns submitted after this date will be subject to a penalty amounting to the higher of £300 or 5% of the tax due for the year.   Any tax for 2017/18 not paid by this date will be subject to a further 5% penalty (in addition to an interest charge). Corporation tax 01 June 2019 Due date for corporation tax for companies with a twelve month period end 31 August 2018 that are not “large” or “very large”. 14 June 2019 Due date for quarterly instalment payments for “large” companies (with a twelve month accounting period): Period end 30 November 2019 – first quarterly instalment; Period end 31 August 2019 - second quarterly instalment; Period end 31 May 2019 – third quarterly instalment; and  Period end 28 February 2019 – fourth quarterly instalment. 01 July 2019 Due date for corporation tax for companies with a twelve month period end 30 September 2018 that are not “large” or “very large”. 14 July 2019 Due date for quarterly instalment payments for “large” companies (with a twelve month accounting period): Period end 31 December 2019 – first quarterly instalment; Period end 30 September 2019 - second quarterly instalment; Period end 30 June 2019 – third quarterly instalment; and Period end 31 March 2019 – fourth quarterly instalment.  

Long-overdue reforms to the Irish investment limited partnership could help Ireland remain at the forefront of the continuously evolving international funds sector. There has been a renewed focus in recent months on the importance to Ireland of a suitable regulated fund platform through which private equity investors can invest. The lack of a suitable investment limited partnership structure is possibly the biggest gap in Ireland’s financial services offering and getting it right is critical. There is a feeling that we are close to that point now. Under current rules, Irish investment funds can be established as an investment company, a unit trust, an investment limited partnership, a common contractual fund or an Irish collective asset-management vehicle. However, the private equity sector has traditionally utilised investment limited partnership structures for their investments. What is a limited partnership? A limited partnership is a partnership with a minimum of two persons (a person can be an individual or a corporate body) conducting business with a view to making a profit. The limited partnership does not have a separate legal personality to the partners. An Irish limited partnership, created under the Limited Partnership Act 1907, consists of no more than 20 persons (in the case of a limited partnership carrying on the business of banking, no more than 10 persons) and must consist of one or more persons referred to as general partners, who shall be liable for all debts and obligations of the firm, and one or more persons to be referred to as limited partners. The liability of the limited partners is limited to the extent of their contribution to the partnership. A limited partnership is generally deemed to be a “tax transparent” entity for tax purposes, preventing double taxation and ensuring that the fund or its investors will not be in a worse-off position after investing through the fund than they would have been if they invested in the underlying company/asset directly. The assets and liabilities are deemed to be held directly by the investors in proportion to their individual investment and the investors are generally subject to the tax rules in their home jurisdiction in respect of any tax charge, relief or allowances available as they would arise. The limited liability is also attractive, particularly to passive investors, and limited partnerships are generally not subject to investment restrictions. Furthermore, a limited partnership does not benefit from the tax treaty network of the fund jurisdiction. One would therefore typically seek to rely on the tax treaty between the investor location and the jurisdiction of the underlying investment. Uses of a limited partnership Due to the advantages noted above, limited partnerships are widely used in the alternative investments sector and are particularly attractive to the private equity sector. The US private equity market has a long-established history of investing through Delaware and Cayman limited partnership structures and in more recent times, it has moved to set up regulated structures in the European Union to secure access to the European market. What is an Irish investment limited partnership? An Irish investment limited partnership is formed under the Investment Limited Partnership Act 1994 and unlike the Limited Partnerships Act 1907, it does not limit the number of partners. An Irish investment limited partnership facilitates investors who choose to invest in a collective investment fund. It is deemed to be transparent for Irish tax purposes, can be regulated under the Alternative Investment Fund Managers Directive and is authorised by the Central Bank of Ireland, whereas a partnership formed under the 1907 Act cannot be regulated. Why is reform required? While the number of investment funds and the volume of assets under management continue to grow in Ireland, it is widely acknowledged that the Irish investment limited partnership has a number of shortcomings. As a result, it is not as popular with fund managers and promoters as other Irish fund structure offerings. This results in a perceived gap in the Irish offering and impacts our ability to claim to have a full suite of product offerings for the investment management sector. Consequently, reform of the investment limited partnership has been muted for a number of years. The industry is hopeful that the amendments will: Align the investment limited partnership with European Union and international standards and best practice; Ensure that the structure meets the requirements of the Alternative Investment Fund Managers Directive;  Facilitate the establishment of umbrella structures; and Facilitate the migration of an investment limited partnership to and from Ireland. Where are we now? The Irish government initially approved the reform of the 1994 Act in July 2017 via the proposal to introduce the Investment Limited Partnerships (Amendment) Bill 2018. Reform of the 1994 Act is also referenced as a strategic priority for Michael D’Arcy T.D., Minister of State for Financial Services and Insurance at the Department of Finance, in the IFS 2020 Action Plan for 2019, which was published in February of this year. A key strategic measure noted in the plan relates to changes to the legislation governing the limited partnership. While it is worth noting that this bill was also referred to in previous action plans, it is encouraging to see that government remains committed to the reform of the legislation governing the investment limited partnership and has acknowledged its importance in supporting the development of continuous growth in the finance and funds industry in Ireland. A draft bill is expected to be published in the coming months and subsequently enacted into law at some stage in 2019. If this does indeed happen, it will be of enormous importance to the industry and will help Ireland maintain its position at the forefront of the continuously evolving international funds sector while increasing the domicile options available for fund managers, private equity funds and venture capital funds. Peter Vale is a Tax Partner at Grant Thornton. Brian Murphy is a Director in Financial Services Tax at Grant Thornton.

Following the inconclusive BEPS project, the OECD has embarked on a second attempt to determine how to tax the digitalised economy. A planned revision of international tax rules for the digital era is currently being debated at OECD level. 127 countries and territories have agreed to tackle some of the most disputed issues of international taxation; not least, where digital firms’ income should be taxed. More details materialised recently in the OECD’s consultation on the taxation of the “digitalised economy”. The 2015 Base Erosion and Profit Shifting (BEPS) project was inconclusive on how the digital economy might be taxed. This OECD consultation is part of a second attempt to work it out. In effect, it’s BEPS II. The digital tax debate has been top of the European Union’s (EU) agenda for some time now. So perhaps the only good news emerging from the OECD proposals is that the EU looks set to ditch its plan to introduce an EU-wide digital tax. The EU has, however, agreed to work on the global reform of the taxation of digital companies. The OECD is seeking to reform the wider international tax system under the concept of ‘digitalisation of the economy’ by moving beyond its narrow focus on highly digitised businesses to address the growing concerns surrounding the taxation of business models built upon technology innovations. The proposed work programme is broad in scope and could potentially affect all businesses operating internationally, across all sectors. Determining how to tax the digitalised economy is not straightforward. The OECD is proposing that companies should be taxed more by reference to where their markets are, rather than where they might have a management or physical presence. That’s an attractive proposition for larger economies with larger markets. For smaller countries, this approach will not be a source of delight.  Public consultation took place at OECD headquarters in Paris on 13 and 14 March. The OECD is still in the early stages of this process and stakeholders should engage at each stage – the significance of this consultation should not be underestimated. Brid Heffernan is a Tax Manager at Chartered Accountants Ireland.

The UK’s research and development scheme offers generous tax savings to companies, but is it sustainable and are there risks? As those working within the accountancy industry in the United Kingdom (UK) will largely be aware, the UK’s research and development (R&D) relief scheme offers considerable tax savings to qualifying companies. The scheme for small- and medium-sized enterprises (SMEs) is particularly generous, offering relief totalling 230% of qualifying R&D expenditure and cash rebates for loss-making companies. The purpose of the relief is to support companies working on innovative science and technology projects in an effort to increase economic growth by promoting innovation. There is a risk, however, that the relief could be perceived as an opportunity for companies to obtain funds in instances where the claim may not be entirely legitimate or as a lucrative opportunity for advisors to promote a tax reduction strategy. Current climate HMRC statistics indicate that both the number of R&D claims being made and the total financial support claimed through R&D tax credits have increased drastically since the introduction of the relief in 2000, with a particular surge since 2014. Although the UK government appears to equate increasing R&D claims to increasing R&D investment and innovation, this link may be somewhat tenuous. Due to the retrospective nature of R&D claims, claimant companies will not necessarily undertake increased R&D activities as a result of making a claim. In some cases, a claim will be made for activities that the company would have undertaken irrespective of the availability of relief. Furthermore, awareness of the scheme has increased significantly in recent years. This is due in part to the fact that the relief is widely promoted by R&D claim advisors, including a number of boutique firms that specialise in assisting with R&D claims in return for a portion of the tax savings generated. Potential risks Although the enquiry limit is typically two years or less from the end of the accounting period, discovery powers enable HMRC to make an assessment if they determine that a relief has been given which is, or has become, excessive. A discovery assessment can be made where the loss of tax was brought about carelessly or deliberately by, or on behalf of, the company and where the HMRC officer could not reasonably have been expected, on the basis of the information available, to be aware of the facts giving rise to the loss of tax. The general time limit for discovery assessments is four years, increasing to six years for cases involving carelessness and 20 years for those involving deliberate action. HMRC has been known to seek penalties regarding incorrect R&D claims on the basis that the company was careless in failing to obtain professional advice considering the size of the company and the claim. For companies within the scope of the Senior Accounting Officer (SAO) regulations, the appointed SAO in particular should ensure that he or she is satisfied that R&D claims are accurate as the SAO may be held personally accountable for the failure of the company to submit accurate tax returns. Potential issues with R&D claims A range of potential issues can arise when it comes to R&D claims, including: Documenting insufficient technical detail to support the claim (for example, presenting the claim in a glossy report that fails to provide the information necessary to evidence its validity); Failing to identify appropriate claim boundaries (for example, claiming for an innovative project in its entirety without isolating the elements that meet the relevant criteria, or claiming for projects that span many years using the same supporting narrative, therefore failing to evidence how the project continues to meet the criteria over time); Overstating the claim (for example, claiming expenditure for directors’ time where directors have not been directly and actively involved in resolving technical uncertainties); Claiming non-qualifying expenditure (for example, consumable costs where the resulting product has been sold to customers. Such costs would have qualified prior to 2015); and With software development claims, assuming that a technological environment is indicative of technological uncertainties. It is crucial to ensure that a project is assessed against the qualifying criteria and that the supporting narrative is robust and can withstand the scrutiny of HMRC’s software specialists. The future of R&D relief HMRC has been relatively supportive of companies claiming R&D relief to date and enquiries into R&D claims are reasonably infrequent. Consultation undertaken in 2015 sought to improve access to the relief for small businesses and an ‘Advance Assurance’ scheme was introduced for first-time claimants as a means of simplifying the process. With the UK undergoing a period of significant uncertainty, not least due to Brexit, it is difficult to speculate on future government policy. The benefits of R&D tax incentives and/or support for the scheme could be enhanced in order to encourage companies to operate in the UK, stimulate innovation and increase the UK’s competitiveness. Alternatively, the spiralling costs of R&D relief could render the scheme a target for cost-cutting measures. If so, the UK could follow in the footsteps of the Republic of Ireland where R&D claim investigation activity has increased and claims are now subject to heightened scrutiny (for example, external experts assisting in the evaluation of claims). Revenue Commissioner investigations have reportedly exposed high levels of abuse of the scheme with over €57 million recouped from R&D claimant companies in the five years to 2017. The risk of penalties for non-compliance and the potential for increased scrutiny of claims emphasise the importance of ensuring a high level of diligence in the preparation of claims. It is advisable that companies, their directors and advisors ensure that an R&D claim is legitimate, accurate and can be fully supported and justified to HMRC in the event of enquiry. Cathy Kelly is a Senior Manager at BDO Northern Ireland.

Many businesses are using MTD as an opportunity to revamp outdated compliance processes and seek out opportunities to automate time-consuming processes. Making Tax Digital (MTD) was introduced on 1 April 2019 in the United Kingdom (UK) with a six-month deferral in place for a small cohort of taxpayers. The aim of MTD is to transform and modernise how tax is reported and managed, and the first stage of MTD is to bring VAT into the digital domain. For VAT periods commencing on or after 1 April 2019, all VAT-registered businesses with a turnover in excess of the VAT registration threshold (taxable supplies of £85,000 per annum) will be required to maintain digital records for VAT and submit their VAT returns digitally. There will be some limited exceptions, which are in line with the current exceptions for businesses that are unable to submit returns electronically (due to lack of internet access, insolvency or religious beliefs, for example). Once a business is covered by MTD, it will remain within the regime even if its turnover later goes below the threshold, while businesses for which MTD is not mandatory can opt into the regime if they so wish. The UK is one of many jurisdictions taking measures to modernise the tax reporting process. MTD is unique in its design and, unlike measures taken in mainland Europe, doesn’t require the provision of additional data to the tax authorities. However, the need to maintain quality data to support the tax reporting process is critical for businesses to build the robust electronic audit trail that is now required. MTD requirements There are three principal requirements in relation to MTD for VAT. Each requirement is outlined below. Digital records  (effective from 1 April 2019) Details of the business transactions that directly lead to the creation of the summarised VAT return figures due for periodic submission to HMRC must be maintained in digital form within ‘functional compatible software’. The time of supply, value of supply and the amount of input VAT to be claimed must be recorded digitally in respect of all individual purchase transactions. For sales, it is necessary to record the time of sale, value of sale and the applicable VAT rate. This requirement may be straightforward for larger businesses, which already record granular data in enterprise resource planning (ERP) systems. While standard accounts payable or accounts receivable transactions will contain the required data, however, exceptional items recorded by journal entry or manual workarounds are presenting challenges to businesses in meeting their MTD obligations. It should be noted that where improvements can be made to the raw data and system tax logic supporting VAT compliance, this will help streamline the tax compliance process and help businesses meet MTD’s other requirements – in particular, the need to build “digital links”. Digital links  (soft landing up to 1 April 2020) It will be necessary to demonstrate that “digital links” are used throughout the end-to-end VAT return preparation process to transmit data between systems used to produce data relevant to the VAT return. Re-keying data and the use of ‘cut and paste’ are specifically prohibited. Information flows between systems must therefore be automated. It should be noted that links between various Excel documents are permitted. However, businesses will be challenged by the manual adjustments and various journal entries that typically form part of the VAT reporting process. While this requirement has the force of law from 1 April 2019, HMRC has confirmed that a “soft landing” period will apply, whereby penalties will not be imposed for non-compliance prior to 1 April 2020 (or 1 October 2020 where the deferral applies). However, the soft landing applies only in respect of the digital links requirement. Digital submission of VAT returns (effective from 1 April 2019) For VAT periods commencing on or after 1 April 2019, VAT return information can only be submitted to HMRC via an application programme interface (API). It will no longer be permitted to manually complete the nine-box UK VAT return via HMRC’s portal. HMRC has issued a list of compatible software packages that will support this requirement. For some of the larger businesses that already keep digital records and have automated VAT compliance processes which comply with the first two requirements mentioned above, MTD may simply require investment in bridging software to allow the business’s software package(s) to ‘talk’ to HMRC’s systems and achieve compliance with the third requirement. For others, more action may be needed depending on how the business arrives at its VAT return figures at present and the extent to which records are currently maintained digitally. Deferral A six-month deferral is available for certain categories of taxpayer including public bodies, members of VAT groups and foreign non-established businesses with a UK VAT registration. It should be noted that a specific direction from HMRC is required in order for the deferral to apply. We understand that HMRC has written to the taxpayers they believe to be in this category. Where the deferral applies, the requirements in respect of digital records and the digital submission will apply from 1 October 2019, while the requirement to maintain ‘digital links’ will not apply until October 2020. Businesses that believe they should be entitled to the deferral, but have not received a notice from HMRC, should contact their case manager as a priority. What’s next? It is expected that MTD will eventually be extended to income tax and corporation tax. An exact timeline for implementation has not been confirmed, but HMRC has stated that it will not be before April 2020. MTD for income tax and corporation tax will likely require periodic disclosure of income, expenditure and profit data, which is not currently disclosed until annual tax returns are filed. Many commentators view this as signalling the beginning of the end of the tax return as we know it. There has been a clear shift in recent years towards real-time reporting and greater collection of data by tax authorities. This is perhaps most evident in Spain, where the 2017 introduction of Immediate Supply of Information requires detailed invoice data to be filed with the Spanish tax authorities within four days of the transaction. This prompts the question: when will such measures be introduced in Ireland? Revenue’s first step into the world of real-time reporting, PAYE Modernisation, is now up and running. Changes to the administration of VAT and other operational taxes may be a logical next step as Revenue continues to modernise Ireland’s tax system. Conclusion As tax authorities’ analytics capabilities become more sophisticated, businesses will have to deploy significant resources to react to tax authority changes. While the exact requirements may vary across jurisdictions, the principle of ‘garbage in, garbage out’ holds true across the board. Many businesses, especially those with operations in multiple jurisdictions, are using MTD as an opportunity to revamp outdated compliance processes and seek out opportunities to automate time-consuming processes before the compliance burden gets even larger. As businesses seek to future-proof their tax reporting process, the starting point for tax and finance teams is typically a data cleansing exercise and a review of tax functionality in finance systems to eliminate the root cause of existing inefficiencies and workarounds. Key steps in preparation for Making Tax Digital Businesses should assess the impact of MTD on their UK VAT reporting process to ensure that they are compliant from 1 April 2019. This assessment should include:  Reviewing the existing end-to-end process to ensure it is efficient and accurate; Securing confirmation from HMRC where entities are eligible for deferral; Verifying that the business is capable of submitting VAT returns digitally via an API for the first VAT return period commencing on or after 1 April 2019; Reviewing existing records to confirm that they meet the MTD digital record-keeping requirements and are retained in functional compatible software; Putting a plan in place to ensure that the journey of information, from source to VAT return, will be compliant with the digital link requirement from 1 April 2020. As this may involve changes to finance systems and business processes, early engagement with IT is key; and Where the deferral applies, ensuring that correspondence has been received from HMRC to this effect. Jennifer Upton is a Director in KPMG’s Belfast VAT team. Senan Kavanagh is an Associate Director in KPMG’s Tax Technology team.