Alex Baulf, VP of Global Tax at Avalara
Too often, tax compliance is treated as a back-office, gnarly task. Something that’s usually siloed away in the finance department of a business and never to be spoken of until a certain time each year. But that mindset is quickly becoming outdated – and it’s now very risky.
With changing regulations, the UK government’s double-down on liability rules and penalties for non-compliance, all areas across the business are responsible. Failing to comply or missing deadlines can lead to significant financial penalties. For example, filing your companies tax return’s one day too late will result in a £100 penalty, with that £100 increased to £500 if the tax return is late three times in a row.
On top of this, penalties are increasingly extending to directors and senior management. In particular, HMRC can issue Personal Liability Notice’s (PLNs) on individual directors for failing to meet tax compliance standards. This can even result in director disqualifications later down the line. These types of errors damage brand trust, potentially affecting M&A plans or customer wins. It’s not a good look. That’s why businesses leaders need to buck their ideas up on tax compliance.
The accountability shift
Tax used to be something only regulators cared about. Now, investors, media, employees and customers do too. There’s a reputational risk behind falling short in tax compliance, sitting closely beside cyber risks or ESG.
However, slipups in tax compliance can play out in the public eye and erode a business’s trust just as easily and fast. More often than not, big companies hit the headlines over VAT disputes with HMRC or unpaid corporation tax. These types of stories highlight how leaving tax compliance on the backfoot can morph into a bigger and messier enterprise risk. With big companies trending for the wrong reasons, it’s only common sense that directors and execs are facing greater scrutiny for tax oversight failures.
I got new rules, I count ‘em – but make it tax rules
The global tax landscape is shifting faster than most boards realise and rule changes are being rolled out constantly. Digital reporting obligations, VAT rules, invoicing requirements and ecommerce thresholds require constant monitoring. Manually keeping up with all these updates can be draining and time consuming, it’s also something that invites human error.
Most notably in the UK is the phased roll-out of Making Tax Digital (MTD), a programme aiming to digitise Britain’s tax system. It will fully replace the traditional, paper-based processes. Whilst MTD has been alive for some a few years, there are some changes coming this year. From April 2026, businesses with an annual gross income of £50,000 must comply with MTD for income tax. It’s important business leaders have visibility over their company’s tax structures so when the time comes, their fully ready to meet regulatory expectations.
What’s more, MTD will replace annual submissions with quarterly submissions, using HMRC-compatible software will be mandatory. Now under a time crunch, finance teams need the board’s active oversight to prevent missed deadlines. With a greater focus on the digitalisation of taxes, businesses need to get ahead with the latest-market automated platforms. In turn, they’ll meet MTD and other regulatory changes with confidence.
Getting the board on board
Being tax ready and board ready go hand-in-hand.
Last year, HMRC outlined its aim for 90% of customer interactions to be digital by 2030, reducing paper correspondence by shifting to digital-first communication. With this in mind, boards should be asking management questions such questions like: are our taxes automated, or are we relying on manual intervention? How confident are we that we would pass an audit tomorrow?
Asking the right questions is the first step here, it forces directors to work with their finance teams to identify weak spots in their tax processes. Mapping out the current existing tax process from start to finish and pinpoint where data is collected, processed and validated. If VAT errors occur, is it because of manual data entry, and, if so, how can that be fixed?
Documenting pain points is key. By knowing where the business is lacking, organisations have a baseline to reference when implementing automation platforms later down the lane. Next, picking the right automation solution is no easy feat. It has to cater to the business’ compliance needs, and that’s another reason why boards must be ‘in the know’.
Once tax automation platforms are in place, businesses can’t afford to put it on the backburner. Other pressing matters may take priority, but businesses need to be regularly reviewing their filing process to ensure accuracy and efficiency is improving. Tracking metrics significantly helps too. This could include looking into reducing VAT errors compared to manual processes, and time savings that could be made in preparing and submitting returns.
Finally, platforms need to be on top of the latest tax rules across multiple countries, so businesses can stay compliant. But, that also means being to up to date with newer technology infrastructures. Our Avalara Compliance Cloud uses cloud-based technology that does the dirty work. It frees up employee’s time, so they can focus on more fulfilling and creative tasks. These types of software are vital for businesses looking for a modern-first approach that automates VAT and waves human errors for good.
Given the UK’s widespread adoption of mandatory e‑invoicing and digital VAT systems, real‑time insight is now a requirement, not a luxury. That’s why it’s imperative that board members get-on-board with the future of tax compliance.