In 2015, HMRC announced the Making Tax Digital (MTD) initiative along with plans to fully modernise the UK tax systems in order to help to reduce tax errors within the UK. Fast forward 3 years and with less than a year to go until the initiative comes into effect, most businesses that are currently using Dynamics NAV will need to be prepared for this change in legislation.
A step in the right direction: Making Tax Digital
As explained above, the Making Tax Digital initiative was announced to help bring the current tax system into the 21st century. The aim of this initiative is to make it simpler for both individuals and businesses to manage their finances through a new online tax system which will allow users to view personalised tax accounts which provides them with relevant and up to date information.
The initiative will come into force by April 2019 and will be compulsory for all VAT registered businesses with a turnover above the VAT threshold (£85,000) including Microsoft Dynamics NAV users with versions older than 2016.
By April 2019, businesses will need to be able to do the following:
- Keep digital records for VAT purposes
- Provide VAT return information to HMRC through MTD compatible software (such as Microsoft Dynamics), not through the HMRC online portal
You can read all about the Making Tax Digital initiative and the specific legal requirements by clicking here.
How is Microsoft supporting the Making Tax Digital Initiative?
Microsoft has stated that their Dynamics NAV and Dynamics 365 Business Central accounting software will fall within the Making Tax Digital legislation when it goes live in April 2019, at least in mainstream support.
Currently, if you use a Microsoft Dynamics solution, digital records are already kept for each transaction in the system and it also it allows you to submit VAT reports electronically. To comply with MTD, your system needs to use an Application Programme Interface (API) to digitally link between HMRC and electronic records which may involve a cost.
However, as technical requirements are unclear, Microsoft is currently working with the HMRC to better understand any further updates to Microsoft Dynamics products that will be required. Further details on action points for your business and whether you need to upgrade your existing Dynamics solution will be confirmed by Microsoft in due course.
This image was created by Microsoft
And finally, a quick disclaimer from everyone at Advantage. 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 Microsoft Dynamics NAV or Microsoft Dynamics 365 Business Central solution or an upgrade on your existing ERP system, please get in touch with Advantage today.
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