Making Tax Digital (MTD) is a transformational approach to taxation in the UK from HMRC. The first change is coming in 2019 and will affect every organisation from their processes to how systems are set up to record and report tax.

As a Microsoft Dynamics NAV partner, we are helping several of our customers work through the how best to approach Making Tax Digital.

Which versions of Dynamics NAV will be Making Tax Digital compliant?

Any Dynamics product that is still under mainstream support will be getting an update from Microsoft to ensure full compliance.  This means the following versions of Dynamics NAV will be automatically updated:

  • Dynamics NAV 2018
  • Dynamics NAV 2017
  • Dynamics NAV 2016
  • Dynamics NAV 2015

Microsoft have not confirmed when this update will take place as there are still some further details to come from HMRC however we anticipate clarity by the end of 2018.

Receiving this update is however not enough to guarantee full compliance – there will be a number of fields and reports that will need to be confirmed and by April 2020 you will need to ensure all of your processes are fully digital.

What about older Dynamics products?

All other Dynamics NAV products will not be receiving an update and therefore if you are using one of these systems you will need to take action to become compliant.

There are two key principles to Making Tax Digital (see our article Making Tax Digital explained). For the first point, digital record keeping, you will be compliant as digital VAT records are kept in Dynamics NAV so that’s a positive. Ensuring you are capturing all the right fields in these reports is crucial.

For the second point, reporting on VAT, a Microsoft update will not be received as the product is no longer supported. A solution for digitally submitting your VAT information will therefore be required. There are two possible ways of dealing with this:

  1. Bridging solution – HMRC is making an API available whereby a custom application can be built to work with your Dynamics solution and allow you to set up a workflow that submits your information directly to HMRC.
  2. Upgrade – there is a clear upgrade path available to Dynamics NAV 2015 or newer. For older versions this will require more work as there are more changes to take into account, but it may be your best solution. This will mean that you will automatically receive any updates from Microsoft to ensure your system remains compliant.

To discover more about Making Tax Digital and Microsoft Dynamics download our guide here or visit our Making Tax Digital Hub.