HMRC is in the process of implementing the first step of Making Tax Digital which will be placing new requirements on VAT registered businesses who are above the VAT threshold (£85,000). These requirements will be rolled out in a number of phases. The first phase which has a deadline of April 2019 will require UK businesses above the VAT threshold to meet the following conditions when they come into practice:
- Keeping records in a digital format. For users of ERP systems this will not have any impact as these records are already kept digitally within these systems.
- Submit VAT returns electronically using software approved by HMRC (see our MTD options for more info).
- If you are new to the VAT 100 setup, get in touch with our experts to discuss how we can help you with this and get VAT 100 installed and activated.
- If you are new to the GP Service pack, get in touch with our experts to discuss how we can help you with this and get the GP Service pack installed and activated.
- If you are having issues with the Making Tax Digital review then you can find some FAQ’s here.
Please note: The below approach only works on GP versions 2016 or above (if you are using GP versions below 2016, then please get in touch with us to discuss the other MTD options that are available).
As well as being on Dynamics GP versions 2016 or above, before you look to complete the below steps, you will need to ensure that you have both the GP Service Pack & VAT 100 installed and activated and have spoken to your account manager or a GP expert to discuss the best approach.
Also, just in case you make any mistakes during the steps below, please ensure that you have taken a full back up of your GP system before you start.
Stage 1: Setting up Making Tax Digital for VAT
The Making Tax Digital feature for Dynamics GP makes use of a service connection to directly communicate with HMRC. To start the ball rolling, please complete the following steps:
Step 1: You will need to go to the Company Setup window which you can do by logging into your GP solution then go to ‘Tools’, followed by ‘Setup’ then ‘Company’ and ‘Company’. You must then specify your company’s tax registration number.
Step 2: Also, whilst in the Company Setup window you will need to enable VAT 100 which you can do by clicking on ‘Options’ and mark the ‘Enable VAT 100’ checkbox. (This assumes you are using the standard GP VAT 100 report. Speak to your Account Manager if you are proposing to use or want further information about the VAT Column Daybook reporting tool.)
Step 3: Next, you will need to go the UK Digital VAT Setup window which you can do by going to ‘Cards’ then ‘Company’ followed by ‘UK Electronic VAT Setup’. When the window opens you will need to specify that you would like to use the Making Tax Digital service by marking the ‘Use UK VAT Making Tax Digital’ checkbox.
Stage 2: Setting up VAT returns
HMRC keeps a list of VAT obligations for companies which are periods for which they must report VAT and the date of when it is due. HMRC provides this information through their API which allows Dynamics GP to have the obligations. You will find that Dynamics GP stores VAT obligations as ‘VAT Return Periods’ and are used to do the following:
- Provide you with reminders about upcoming VAT return deadlines and when you are overdue.
- Automatically enter start and end dates when you create your VAT returns.
To be able to use the Making Tax Digital service, you will need to connect to the service from the VAT return window. You can get to this by going to ‘Tools’ followed by ‘Routines’ then ‘Company’ and lastly ‘VAT Return’.
To start the connection, you will need to create a new VAT return.
Stage 3: Connecting to the Making Tax Digital service
Step 1: After you have clicked the option to create a new VAT return within the window, you will need to enter a VAT Report ID followed by a year (this is the year that your VAT tax obligation is due).
Step 2: Once you navigate off the ‘Year’ field, the HMRC log in window appears where you can login to the HMRC site.
Step 3: Give the authority for the software application to access your VAT information.
Step 4: Once you have logged in, you will see that the ‘VAT Obligations’ window opens where you will be given the option to pick your obligation period. This comes from the HMRC site and will return your company’s VAT periods.
Please note that the screenshot above is based on a test environment with quarterly VAT tax and only 2 obligation periods open. You will see that your view is different from this.
Step 5: After you have completed the above and returned to the ‘VAT Return’ window, select the ‘Calculate’ option to have the system calculate VAT for you as shown in the below screenshot.
If you find that the calculations are not right, you are able to clear the window at this time. Then simply repeat the above steps when you are ready. Select ‘Save’ to save the information.
Step 6: After you have saved the VAT return, the VAT box fields are now editable so you can make any adjustments where required.
You will see that the ‘Final Return’ checkbox is also editable and it must be marked before you can submit it.
Step 7: Next, select the ‘Submit’ option to start the submission process. At this point you will need to provide your HMRC credentials again.
You will see that you receive a mandatory message required by HMRC, select ‘OK’ and then you will see a progress bar for the VAT information being submitted to HMRC.
When the submission has been completed you will see the below VAT response window.
After you have completed the above steps the process is finished.
NB: The above MTD process for submitting to HMRC also works for the VAT Daybook module in Dynamics GP.
If you are unsure of how to complete the above process, require additional GP support around the MTD compliance process or would like to discuss our Making Tax Digital options, then please get in touch with our team of GP experts today.
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