UK businesses lag behind EU counterparts on digital VAT readiness, as confidence masks operational gaps

According to new research from the Thomson Reuters Institute (TRI), businesses across Europe may be overestimating how prepared they are for the upcoming EU VAT in the Digital Age (ViDA) reform. In fact, the survey reveals a clear gap between awareness and action — while awareness is high, organisations are significantly less prepared than they believe.

UK respondents in particular report lower operational readiness than their EU counterparts on nearly every readiness measure. The findings highlight a growing disconnect between confidence and capability that could have real implications for UK businesses trading with EU member states.

Thomson Reuters Institute surveyed tax and finance professionals in organisations with revenues of at least €100 million based in Germany, France, Spain, Netherlands, Sweden, Belgium and the United Kingdom.

The research has identified a ‘confidence curve’ where organisations initially feel prepared, but confidence drops once detailed planning begins and the full complexity of systems transformation becomes clear. This gap between perceived readiness and actual preparedness is consistent across all surveyed countries.

Additionally, confidence levels vary by function. Tax professionals are more likely than finance professionals to have a deep understanding of ViDA and express concerns about whether their organisations have sufficient resources and are on track to achieve ViDA compliance.

While readiness is generally low across Europe, the survey highlights uneven preparedness levels across countries.

Respondents from Spain reported the strongest readiness in integration between invoicing systems and VAT reporting, as well as real-time VAT validation. German organisations reported higher readiness in areas such as goods tracking, master data quality, and Know Your Customer (KYC) processes. Respondents from the Benelux region reported leading readiness in real-time VAT determination at the point of transaction.

For UK businesses trading with the EU, these gaps could become increasingly significant as new requirements take effect across member states ahead of the July 2030 deadline.

TRI’s research also highlights a shift in how organisations view the risks of non-compliance. Contrary to expectations, financial penalties are not the primary concern. Instead, the biggest risk identified by respondents is operational.

In a real-time reporting environment required by ViDA, the inability to issue compliant invoices can directly impact an organisation’s ability to transact, which highlights compliance as a business continuity issue rather than a purely regulatory one.

Fears regarding business disruption (45%) and reputational damage with partners (45%) were also more frequently mentioned than financial penalties (44%). This underscores the concern that ViDA presents commercial and business continuity risks rather than merely being a tax compliance hurdle.

A key reason for the readiness gap is attributed to how organisations are framing ViDA internally.

Many businesses still view ViDA primarily as a technology initiative focused on e-invoicing. In fact, 60% of professionals surveyed focus almost exclusively on technology and process changes, with fewer than 20% mentioning VAT compliance adaptation and the data governance foundations upon which ViDA depends. This suggests that many organisations are interpreting ViDA first through an implementation lens while the wider governance, risk, and operating model implications are not yet as consistently recognised.

ViDA readiness depends heavily on foundational capabilities, including data quality, systems integration, and cross-functional coordination between tax, finance, and IT. TRI notes that organisations that underestimate these operational requirements risk falling behind as implementation progresses.

ViDA represents a fundamental shift in how VAT is reported and enforced across Europe, moving from periodic reporting to real-time, digital processes.

While businesses across Europe are grappling with the scale of this transformation, UK organisations face an additional challenge: addressing lower readiness in key operational areas while keeping pace with developments in EU markets.

As implementation deadlines approach, closing the gap between awareness and execution will be critical, particularly for companies with cross-border operations.