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Wealth Management

A Making Tax Digital Timeline – From VAT to Corporation Tax

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By Russell Gammon, Chief Solutions Officer at Tax Systems 

 

Initially introduced by HMRC in 2019, Making Tax Digital (MTD) is an initiative that aims to make it easier for individuals and businesses to pay the correct amount of tax and keep on top of their affairs. The first phase of MTD is Making Tax Digital for VAT, which requires businesses to keep records digitally and file their VAT Returns using the capable software.

 

What you’ve missed

MTD for VAT started on 1st April 2019, when VAT-registered businesses with a taxable turnover above £85,000 had to comply. Fast forward three years later and from 1st April 2022, all VAT-registered businesses have been required to follow MTD for VAT rules too, regardless of size. This invited an extra 1.1 million businesses to the party, including smaller VAT-registered businesses – such as landlords and the self-employed – and global companies with UK subsidiaries.

For these businesses, the way they submit their VAT returns has changed as HMRC turns to digitised software. No longer will they be able to key figures into HMRC’s portal but must instead submit values to HMRC via their API.

 

Russell Gammon

Right here and now

Digitisation has brought benefits to many industries and the tax sector is no exception. Weeks on from the deadline, businesses should now be reaping the benefits of MTD, aside from simply being compliant with the new requirements.

First of all, purpose-built VAT calculation technology ensures that you pay the correct amount of tax. Whilst being MTD compliant is the baseline required, it does not necessarily ensure that your return is correct; by implementing dedicated VAT software, you remove the opportunity to make certain mistakes when preparing and submitting tax returns. Purpose-built VAT compliance software also increases efficiency. From our research, organisations file their VAT return an average of 3-5 days earlier than before and compliance workloads are reduced by up to 70%. The subsequent elimination of spreadsheet errors, flagging of anomalies and faster process, not only reduces the risk of compliance audits and potential penalties for an inaccurate tax return, but frees up more time to derive business insights from the data.

This business intelligence can inform tax planning by identifying critical gaps and assessing business strategies. Access to such huge amounts of data can also be valuable outside of the tax department as these findings can be shared with other teams to help improve policies. For example, accurate and consistent VAT data can provide insight into profit margins in different areas of a business and help regulate strategies should they be found to be too conservative or aggressive.

Finally, with more time and business insights in their hands, tax professionals have more opportunities to exploit. For example, repayment opportunities can be identified through better treatments, and complex processes like partial exemption are easier to manage.

 

Coming up next

MTD for VAT is the “first out of the gate” in HMRC’s desire to become an advanced digital agency. MTD for Income Tax is currently ramping up and Corporation Tax is next on the agenda.

Currently, corporation tax filings are submitted 12 months after year-end with only estimates given – for businesses over a certain size – prior to that deadline. For those under that size threshold, a business’ profit from Q1 of 2022 will not be formally declared until Q4 of 2023 – 21 months later. As a result, HMRC is arguably “in the dark” about what receipts they can expect and the impacts of schemes, such as furlough or the CBILS scheme, until a long time after their implementation.

In November 2020, HMRC released a consultation on Making Tax Digital for Corporation Tax to address these shortfalls by getting more timely information from businesses. Its implementation, scheduled for April 2026, will require businesses to make quarterly submissions of key data points.

In addition to having to provide more data, MTD for CT will potentially require much closer collaboration between VAT and CT processes, and data being shared between the processes will become the norm, rather than the exception. Therefore, choosing the right software for MTD for VAT should be seen as a stepping stone to a broader solution that can, in time, work for all taxes. Making strategic choices now around VAT will continue to pay off as the government’s ambitions for MTD continue to grow.

At the same time, outside of HMRC, there could be the introduction of EU-wide regulations, which require additional standards, even for non-EU countries such as the UK. Again, having the right software in place that can be updated to take these additional requirements into account will mitigate future headaches.

Wealth Management

Green with Envy – an Environmentally Conscious Data Center

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Mark Fenton, Product Manager, Future Facilities

 

Environmental considerations are at the top of every business leader’s agenda and an increasing focus for governments worldwide. For example, in COP 26 discussions at the end of last year, the UK committed to data centers becoming carbon zero by 2050. As a result, there’s growing pressure on data centers – which consume around 1% of global electricity usage – to become greener. Digital twin technology can help data centers reach this goal and achieve additional benefits at the same time.

So, what is a digital twin?

A digital twin is a 3D, virtual replica of a physical data center that can simulate its behaviour under any operating condition or scenario. Using advanced computational fluid dynamics (CFD), the replica can help managers plan changes they intend to make, in terms of layout and technology implementation, in a safe environment. Digital twins provide a clear view of the airflow/cooling systems and the power supplies within the data center and give a physics-based view of how they are operating and allow a sand box to test out potential improvements in a virtual environment. This allows stranded capacity to be freed and cooling to be used at the highest possible temperature whilst maintaining ASHRAE levels, without risk. These capabilities can also be applied to making data centers greener as we’ll explore throughout this piece.

Unlocking efficiency to meet environmental goals

Digital twin technology is already being used by several large global financial services enterprises to unlock operational efficiencies and support green goals.

Mark Fenton

For example, a top five global financial services organisation recently implemented the technology in its data centers containing high-density racks of approximately 14KW to maximise capacity and fine tune efficiency without risk. With a digital twin, they achieved a holistic view of cooling, space, power, electrical, and reporting, meaning that changes could be made to increase capacity without triggering overheating or/and an outage. By unlocking capacity, they also delayed the need to build a new data center at great financial and environmental savings.

Extending the lifespan of existing data centers

Black & Veatch has also used digital twin technology to increase the lifespan of its customer’s existing data centers. It reassessed its clients’ data centers using digital twin technology and found that the lifespan of their facilities could be extended by maximising capacity and space utilisation, as well as effectively distributing stranded power. By running several modelling scenarios, Black & Veatch established the optimal configuration to yield mechanical systems performance. This ultimately ensured its clients’ existing data center could meet the company’s needs for longer, mitigating the environmental impacts of building a new data center before absolutely necessary or outsourcing to colocation, saving the company millions of dollars.

Financing data centers in an energy crisis

Finally, a digital twin was used for a financial services customer to measure the data center’s availability, capacity, and efficiency to understand its current operational performance. Through physics-based simulation with digital twin modelling the company’s data center reduced the PUE from 2.35 to 2.0, resulting in a $1.15 million saving in energy costs across a 24-month period. This was made possible by integrating digital twins with existing monitoring and DCIM systems to be automatically updated with new deployments, maintenance schedules, and larger capacity project planning. With this, managers could track energy usage and monitor and optimise efficiency for more environmentally friendly outcomes.

While reducing energy usage is vital for the health of the planet, it’s also essential from a business cost perspective. In the context of the current energy crisis, the cost of running data centers is increasing significantly, so operators must think of ways to minimise expenses, and energy efficiency offers a clear road to this.

A new era of data center management

In 2022, data center managers face a whole host of challenges, none more prominent than the climate change battle. As such, data centers have a responsibility to run as efficiently as possible to maximise capacity. Small changes to the data center’s efficiency across large global organisations can make a big difference to the overall business and environmental cost. Not only will this be greener for the planet but will also help protect companies against rising energy prices.

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Technology

How Digital Adoption Platforms can enhance digital transformation and customer experience in the insurance industry

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By Vara Kumar, CPTO & Co-founder, Whatfix

 

Like many industries, the insurance sector was prematurely hastened towards digitalisation due to the Covid-19 pandemic. Now, digital adoption continues to be a key focus of many organisations to strengthen their fully or partially remote workforce with nearly 50% of IT spend being put behind the growth of core applications and infrastructure, and an additional 25% being invested into digital solutions.

But with millions of claims processed every year, needing to provide superior customer service to drive retention, complex procedures and processes to navigate and both internal rules and external regulations to follow, digital transformation plans for insurance organisations are filled with challenges.

Increasingly digitalised workforce

With the pandemic came an overhaul of how we work. Remote and hybrid working is now the norm, and across most industries, there’s been a huge expansion in both the number and type of digital applications used to communicate, collaborate and enhance productivity across an organisation.

For the insurance industry, this has meant that every employee, from underwriters to customer service agents, has had to adapt to handling their steps of the process, from setting up coverage to filing a claim, remotely, and across multiple platforms and tools.

The challenge is ensuring this more digitalised workforce fully understands how to successfully navigate each application effectively and efficiently to ensure they can deliver on their services and customer experience (CX). But putting together a skilled, high-performing IT team can be difficult – according to an enterprise study, 54% of organisations said they’re not able to accomplish their digital transformation goals because of a lack of technically-skilled employees. This is further complicated by the fact that, in an age of labour shortages, the sector is forced to get creative and find ways of managing the workload and navigating new technologies with a smaller workforce.

Changing customer expectations

On top of the challenges that the increasingly digitalised workforce is experiencing, the tech-savvy customer of today also expects more from their insurers. Indeed, the pandemic forced customers as well as organisations to become more IT-literate, and in the customer service space in particular, customer expectations are high.

Customers today want and expect to be able to make maturity or house insurance claims in an efficient and straightforward manner, across multiple platforms, from phone to email to social media, preferably in a matter of minutes.

McKinsey observes that improving the value chain from the customer’s point of view is an important step within digital-ecosystem efforts, and HubSpot found that 90% of consumers expect an immediate response to a customer support issue, with 60% defining ‘immediate’ as under ten minutes. Even pre-pandemic 44% of customers were comfortable utilising chatbots for insurance claims, and 43% were comfortable using them when buying insurance policies.

Undergoing a digital transformation on the customer side is crucial then, as insurance providers that can meet these changing customer expectations are more likely to attract and retain customer loyalty now and in the future. However, just 30% of insurers believe that they have the capabilities to fully digitalise their customer experience.

So, what can insurers do to meet the technological demands of a digitalised workforce and a multi-channel CX for tech-savvy customers?

Using DAPs to boost digital transformations and CX

In a rapidly changing market, Digital Adoption Platforms (DAPs) can be a huge advantage to insurers looking to manage the challenges of today and come out on top. A piece of instructional no-code software that sits as an additional layer on top of other software applications, such as Claims Management or Policy Administration Systems, to help train and guide users on how to best use the software, DAPs can massively improve the agility and effectiveness of business processes across an organisation.

On the employee side, for example, DAPs can help insurers to manage challenges of a frequently changing workforce by making it easier for employees to get to grips with new digital applications. With the likes of  guided walk-throughs and task lists, which help employees through each step they need to know and just-in-time nudges to reduce policy administration, claim, or underwriting processing times, employees are more efficient and technology adoption is streamlined and accelerated. Easy to integrate into existing systems, DAPs can be used to not only train and onboard new employees but also upskill veteran workers, training the workforce as a whole on the latest technologies being used across the industry. As a result, everyone from underwriters, claims, and service representatives will better understand insurance tools that will enable them to be more productive and better deliver customer experiences leading to better business outcomes. Indeed, from the customer perspective, DAPs can enable companies in the insurance industry to keep CX positive and smooth. Firstly, by training on near real-life scenarios and secondly, by being able to more easily navigate applications, processes and systems internally, customer service representatives will be able to spend more time and focus on the customer and on resolving their queries, without being hindered by technological hurdles. For example, errors made in policy or claims processing can be reduced if employees can use self-help elements of DAPs to mitigate issues and solve queries themselves, in real-time. As a result, customers will be happier with their service, and more likely to stay loyal to that brand.

Customer-facing platforms can also be improved using DAPs. Typically, legacy apps whether on our phones or online, can make it difficult for users to complete their tasks, leaving them frustrated. With DAP user-specific content and just-in-time support, such as pop-ups, automated walk-throughs and user guides for every part of the user journey, customers can experience a smoother journey and have their queries and issues resolved more efficiently..

Drive efficiency and customer satisfaction

DAPs are already growing in popularity, with Gartner predicting that by 2025, “70% of organizations will use digital adoption solutions across the entire technology stack to overcome still insufficient application user experiences.”

So, now is the time for insurance providers to leverage this technology to facilitate their digital transformation plans. By ensuring their increasingly dispersed and digitalised workforce can use the latest applications to their full potential, and that their customer journey is as efficient and easy-to-use across the multiple channels customers expect, insurers will see huge benefits, from increased efficiencies to improved customer satisfaction.

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