Making Tax Digital for VAT: Where does internal control go?

The UK has been moving steadily towards digital tax reporting. The Making Tax Digital for VAT programme is designed to simplify submissions, reduce errors and bring real-time visibility to tax autorities.

On the surface, this promises efficiency for businesses. But for finance teams, there is a deeper question: where does internal control fit in?

Automation without oversight

Digital VAT reporting formats make it easier to push data directly to the authorities. Yet if the underlying data is inaccurate, the errors are simply transmitted faster. Periodisation issues, misclassified transactions or incorrect customs data can all flow into the VAT return without correction.

In theory, errors can be amended after submission. In practice, corrections can be complex, time-consuming and disruptive to reporting cycles. For finance functions already managing tight close processes, relying on later adjustments is hardly a sustainable model.

Digital VAT reporting pushes errors faster, not just data

Customs data as a weak link

One of the most common sources of VAT discrepancies lies in customs declarations. Declared values, currencies and HS codes feed directly into VAT reporting. If they do not align with accounting data, differences emerge.

Some variation can be explained by timing, but not all. Currency conversion errors, the use of proforma invoices or incorrect origin declarations create real mismatches. These misstatements can ripple through the accounts, distort VAT returns and trigger reconciliation issues.

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The audit trail question

Digitalisation does not eliminate the need for an audit trail. If anything, it raises the stakes. Finance must be able to show not only what was reported, but also where the data came from and how it was validated.

Authorities may welcome digital VAT submissions, but they will also expect clarity when discrepancies arise. Without internal checks, finance risks being caught off guard, responding only when questions are raised externally.

Digitalisation does not remove accountability. Internal control still matters

Digital reporting requires digital control

Making Tax Digital for VAT is not only about faster reporting. It requires finance to ensure that the data flowing into those reports is accurate, complete and traceable. This means:

• Screening customs and trade data before it enters VAT reporting
• Reconciling customs declarations with accounting records
• Maintaining documentation that links invoices, declarations and VAT statements
• Correcting errors proactively rather than waiting for authority challenges

Digitalisation may reduce administrative work, but it does not reduce accountability. The burden of internal control remains, and the finance function carries it.

As VAT reporting becomes more automated, the role of finance is not to press submit. It is to ensure that what is being submitted can withstand scrutiny. That requires visibility of the data behind the numbers, particularly where customs is concerned.