This study analyses how the recent adoption of digital technology (Making Tax Digital) impacts VAT compliance processes for microenterprises and SMEs within the East Midlands region of the United Kingdom. It also highlights the experiences and perceptions of accountants and tax professionals towards HMRCs recommended compatible software and its responses to their adoption issues. The methodology of data collection and analysis is based on a mixed-methods approach that helps to achieve the research objectives and answer the research questions. Regression and correlation analyses were used to demonstrate the relationship between digitalisation and VAT compliance processes. The findings reveal that adoption of digital technologies ease VAT compliance processes, resulting in significant cost savings, accurate filings, and improved VAT reporting through the integration of accounting systems. However, Initial installation costs and personnel training continue to be a concern. Thematic analysis was used to evaluate the qualitative responses that highlight the experiences of respondents in the adoption of VAT automation as well as their perceptions and recommendations about HRMC’s responses to their challenges. Among its key conclusions are enhancements to efficiency, data security, and HMRC programs. The result of the study reveals a positive, growing impact of digital technology on VAT compliance of small businesses using the analysed responses drawn from participants covering adoption, benefits, challenges and areas for improvement. The report will assist policymakers, tax authorities, and small and medium-sized enterprises in negotiating digital adoption for VAT compliance purposes.
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