Making Tax Digital

On 1 April 2019, HMRC’s Making Tax Digital (MTD) programme came into effect. MTD is a transformational approach that affects every organisation from how you run your processes to how your systems are set up to record and report on tax.

In April 2019, Making Tax Digital (MTD), HM Revenue & Customs’ (HMRC’s) strategy to modernise the tax systems went live.

MTD involves a move to digital record keeping and reporting by taxpayers and the improvement of HMRC’s own internal systems to collate relevant information into one digital tax account for each taxpayer.

HMRC set out its intentions to become one of the most advanced tax authorities in the world whereby enhancing the customer experience whilst also closing the tax gap. MTD covers both individuals and businesses across several tax types. For businesses over the VAT registration threshold, VAT is the first tax selected for digitalisation in the UK. This will take effect from 1 April 2019. For Income Tax and Corporate Tax, MTD will not be mandated until April 2020 at the earliest.

At present, most businesses submit their VAT returns through manually re-keying figures into HMRC’s online portal. In line with the move towards digital, the online portal will close from April 2019 and taxpayers will no longer be able to submit VAT returns this way. Instead, all submissions must be done digitally via HMRC’s Making Tax Digital API (Application Programming Interface).

There are three principles that organisations need to be aware of:

  1. Keep digital records for VAT purposes – a full digital record of your VAT information is required to be held on one digital system. This must also document sales which have had VAT applied, including the date of sale, the value of sale and the rate of VAT applied.
  2. Provide detailed VAT return information – you must provide detailed VAT return information to HMRC with MTD compatible software and not through the current HMRC portal. For single VAT entities, many solutions, including some Microsoft Dynamics products, have been updated to comply with the new requirements and there are bridging solutions available.
  3. VAT group entities – in October 2019, VAT group submission via MTD is mandatory. Microsoft will not provide a solution to submit group VAT. Organisations must adopt a group VAT compatible software.

MTD VAT Groups and Microsoft Dynamics Guide

Download our guide to understand the impact of MTD for VAT groups and Microsoft Dynamics users. Our guide provides information on compliance and deadlines for VAT groups and compatible software for Dynamics AX and Dynamics 365 for Finance and Operations users.

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MTD VAT Groups Deadlines

In our article, we discuss the deadlines for VAT groups to use compliant software to send their VAT returns to HMRC using the new Making Tax Digital portal.

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HMRC Overview

HMRC has released guidance on MTD on their website with information for businesses and individuals.

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FAQs

We have created an FAQ page for Making Tax Digital and Microsoft Dynamics.

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Our services

Incremental Group is a Microsoft Gold Partner for ERP. With 20 years experience our business has been offering first class services across the Microsoft Dynamics range. Our large team of ERP and finance consultants and developers will be on hand to deliver your project to the highest standards. We offer a range of services to support Microsoft Dynamics users on their Making Tax Digital journey.

1-Day MTD Guidance Package

As part of our guidance package, one of our expert Finance ERP Consultants will assist you in getting your VAT returns ready for MTD, helping with VAT configuration for all versions of Dynamics AX or Dynamics 365 for Finance and Operations.

Making Tax Digital Guidance Package

Making Tax Digital VAT Groups Module for Dynamics

We have created an MTD VAT Groups Module. It is a custom application for Dynamics that connects your Dynamics finance system to the HMRC API and provides a compliant mechanism for submitting group VAT returns. Our MTD VAT Groups Module is available for Dynamics AX and Dynamics 365 for Finance and Operations and is designed for organisations who have multiple divisions and require to consolidate VAT records and report these electronically.

Making Tax Digital VAT Groups Module

Making Tax Digital Single Entities Module for Dynamics

Our MTD Single Entities Module 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. This Module is available for Dynamics AX.

Making Tax Digital Single Entities Module

Upgrade

We provide a range of upgrade services for Dynamics AX, NAV and GP to ensure you are on the latest version from Microsoft. You will recieve an MTD update from Microsoft which will help you on your road to compliance.

Dynamics AX upgrade

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Four Foundations of Making Tax Digital

1. Better use of information

Making Tax Digital presents significant benefits to UK businesses. It will mean that businesses will not have to give HMRC information that it already has, or that it is able to get from elsewhere, for example, from employers, banks, building societies and other government departments.

Digital tax accounts for all will mean that businesses can see the information that HMRC holds and be able to check at any time that their details are complete and correct. HMRC will use this information to tailor the service it provides, according to each of its users individual circumstances.

2. Tax in real time

Businesses and individuals should not have to wait until the end of the year or longer to know how much tax they should pay. This will benefit tax payers as it should help prevent errors and stop under and overpaying tax.

3. A single financial account

At the moment most taxpayers cannot see a single picture of their liabilities and entitlements in one place – HMRC are changing that. By 2020, taxpayers will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.

4. Interacting digitally with customers

Taxpayers, organisations and their accountants will be able to interact with HMRC digitally and at a time which suits them. They already have access to a digital account which will present them with an increasingly personalised picture of their tax affairs, along with prompts, advice and support through webchat and secure messaging. In addition, digital record keeping software will be linked directly to HMRC’s systems, allowing customers to send and receive information directly from their software.

The Making Tax Digital roadmap, published in December 2015, set out how this bold vision for the future of the tax system would be achieved by 2020.

Making Tax Digital Roadmap

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