From 1 April 2019 VAT-registered businesses in the UK will need to submit their VAT returns using “functional compatible software” due to the Making Tax Digital initiative and if your VATable turnover is above the threshold of £85,000 it will not be possible to submit VAT returns manually via the HMRC and will need to be uploaded via compatible via software. This is a mandated change and HMRC will not be offering any few end-user software so a compatible option will need to be arranged.
Understand if your business will be impacted by MTD for VAT
Making Tax Digital is not simply filing your VAT return digitally, but you also need to store some of your VAT information digitally. If you use more than one piece of software to store your VAT information and do your VAT return that must be digitally linked. Provided you already have accounting software or a compatible application like Dynamics NAV and Microsoft Dynamics GP above versions 2016 then this might be to something you need to factor in. Any manual records you prepare will need to be changed with an automated software-based approach.
An overview of what business processes are needed to adapt to be MTD compliant is a helpful step. You may need to consider some questions such as, what areas of your VAT accounting are paper -based or do not relate to an accounting software, are you invoice based or do you use a cash accounting scheme, what is your process to raise sales invoices and how do you capture expenses?
The software you use will need to be able to communicate with HMRC computers and be able to connect to HMRC API’s. This will mean that some older accounting software will need to be updated and there are ways to prepare yourself with Dynamics NAV and Dynamics GP. In the case of cloud accounting software such as Microsoft Dynamics 365 Business Central then there should be an automatic update for MTD but you may need to speak to your partner or provider to understand how to use the relevant functionality.
If you are using a spreadsheet approach to keeping your VAT records you may be able to use Making Tax Digital compatible bridging software to file returns or 3rd party applications however the process may not be as efficient, intuitive or simple as an accounting software update might provide.
Time your transition
It is of course advisable to make the switch to a MTD compatible solution as soon as possible. With the published VAT Notice 700/22 which covers MTD for VAT and shows that it will certainly be implemented in April 2019 so there will be significant congestion around the deadline from the perspective of HMRC as well as provider. Also, depending on the software you use you may need to training or a longer implementation phase as you transfer your data, adapt to knew processes and upskill your team.
Know what data you will require
What records will businesses need to take:
- Business Name
- Address of your business
- VAT number
- Any VAT accounting schemes used
- The VAT account (the information in this will be used by the software to calculate and fill in the return)
- Total of any adjustments (not the calculate)
For VAT and Sales, the following data:
- Date of supply
- Net value
- VAT charged
- Totals of any adjustments or corrections made to the VAT account
- Totals of sales VAT by different VAT rates, and
- Daily Gross Takings (DGT) – for retailers using a retail scheme
If you haven’t already started preparing for Making Tax Digital it may be time to start doing so. Unsure what is the best solution is for you? Speak to one of our consultants here at Advantage and contact us.
*Disclaimer* Advantage is an ERP, CRM and Managed Services IT firm, not a law firm. The information provided here is for general guidance purposes only. It should not be taken, nor is it intended as, legal advice. Please make sure you conduct your own investigation into Making Tax Digital and where appropriate seek out the advice of a legal professional.
To find out more about how Advantage can help your business implement either a more recent version of Microsoft Dynamics GP or another Microsoft Dynamics 365 Business Central solution please get in touch with Advantage today.
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