“Big data” is something of a buzz-phrase these days – it frequently makes the news headlines in a wide range of areas from genetics to car insurance.
It is also worth remembering that data analysis can be an extremely important factor in ensuring effective VAT compliance.
For most businesses, their VAT calculations are based on automated processes and data which is captured within a pre-programmed accounting package or ERP system.
This offers significant opportunities (e.g. speeds up processes, reduces scope for manual errors).
However, there are also some important risks to consider. The most dangerous of these is the risk of repetitive error caused by a flaw in the initial system set-up. Even a relatively minor error at this level could lead to significant additional VAT liabilities building up over time.
It is absolutely essential to ensure that the VAT logic applied in setting up an accounting system or ERP package is based on sound principles and a thorough understanding of the business concerned Other key issues are: ensuring that systems are regularly reviewed and updated; and, making sure that relevant staff have the appropriate level of training.