Making Tax Digital (MTD) introduces digital record keeping and a whole new way of reporting VAT for businesses. From April 2019 organisations or their accountants will need to use digital record keeping software to interact directly with the HMRC systems via the MTD APIs.

API stands for Application Programming Interface. An API is a software intermediary that allows two applications to talk to each other. The MTD VAT API allows businesses to supply financial data to HMRC, so that clients can fulfil their obligations and be compliant.

How Does Microsoft Dynamics interact with the HMRC API?

Microsoft has announced that they will be updating some newer versions of Microsoft Dynamics and Dynamics 365, see our article for the full list. This list includes all of their products that are currently in mainstream support and all these products will all be receiving an update that should do most of the work, with Microsoft building the connection to the API.

For users of Microsoft Dynamics ERP solutions such as Dynamics AX and Dynamics NAV that are not getting an update you will need to take actions to become compliant, see our article on compliance for Dynamics AX and  Dynamics NAV.

 

Making Tax Digital API

HMRC has made an API available through their site which can be used to connect your ERP directly to HMRC. This has only recently been released but is now publicly available including a Sandbox test environment.

Version and Status V1.0 (Beta)
Available in Sandbox Yes
Sandbox base URL https://test-api.service.hmrc.gov.uk
Available in Production Yes
Production base URL https://api.service.hmrc.gov.uk

 

To connect your ERP to the API will require two steps:

  1. You will need to identify the format that HMRC requires data, matching up things like the field names to the fields in your system. All details of this are available on the HMRC site.
  2. You will then need to customise Dynamics to allow the direct connection with the ERP and assign a batch job that can be triggered to submit your VAT report which is now required quarterly.

Once you upload your VAT account information into Dynamics, it will then update HMRC via the API, this can be automatic or manual depending on your preference. The API then submits this information to an HMRC systems database, where your organisations VAT information is held, including the required VAT payments and whether or not your organisation has met their obligations.

 

Making Tax Digital Module for Microsoft Dynamics

We have created a Making Tax Digital Module, it is a custom application for Dynamics that connects your Dynamics finance system to the HMRC API and provides an intuitive mechanism for submitting your VAT quarterly. This can be set to submit automatically or can be manual depending on your preference. Our Module is available for Dynamics AX, NAV and GP.

Find out more

Download our guide ‘Making Tax Digital and Microsoft Dynamics’ to learn more or visit our Making Tax Digital Hub.