Making Tax Digital for VAT is HMRC’s progression in digitalising tax returns. This is not news; but with only an estimated 12% of businesses currently filing electronically, and 19 weeks until the deadline, it is now pressing. There is still a lot of confusion around it (despite lots being written on the subject), so who needs to worry and what do you need to do?
Does it apply to me?
If you are UK VAT registered, you will need to be compliant with HMRC’s Making Tax Digital when it comes into effect on 1st April 2019. This means you must keep electronic records of your VAT transactions and you must submit your VAT returns via an HMRC approved API.
I already submit returns electronically
Sorry, it’s not the same! The current portal will not be available from 1st April 2019. However, if you’re used to doing this then you are undoubtedly closer to compliance than many. You probably already fulfil the requirement for electronic records but the vehicle you use to submit the return needs to be an HMRC compliant “API”.
What does this mean?
An Application Programme Interface (API) is the vehicle or mechanism that sucks the data into HMRC’s systems. And this is key, as the software you use to upload to the API must be recognised by HMRC as compliant.
I heard it had pushed back to October 2019?
There are lots of rumours about whether Brexit will lead to a further delay, (bear in mind it already has and HMRC are now stating commitment to April 2019) and there’s been some confusion around a 6-month deferral – which is likely to only apply to some 3.5% of VAT registered companies considered “complex”.
Unless you are the minority that falls into the “complex” category (trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, public sector/public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users), you need to be compliant.
Do I have time to switch/upgrade?
It depends on you – what scope do you have? How complex is your business? What are your available resources? There’s a lot to think about, and not a lot of time to get ready for the changes. We can provide a free assessment to help you decide the best route for you to get compliant by April 2019.
Okay, so what do I need to do?
- Maintain digital records (i.e. electronic VAT transactions)
- Make sure any changes are digital (audit trail)
- Submit via the HMRC API using recognised software
You could say, it’s never been easier! Find out if your current finance software supplier will be providing a recognised “fix” to update your system. If so, arrange for the update to be applied, test and train ready for go-live.
If your current software will not be compliant due to either your supplier having no plans to provide a “fix” or you’re on a legacy system, then you have two choices: switch or workaround. You probably have just about enough time to switch if you’re a relatively small business and have a finance only requirement. Whether you have a larger, more complex ERP solution, or the timing is just not great, then the likelihood is that you’ll need a workaround.
You need a plan to ensure you have tested and trained users. This shouldn’t be an onerous task, but it is good practice to plan the steps and provide guidance via processes, documentation and more to prepare the users.
How do I get started with my current system?
There are lots of options for a workaround with varying degrees of support. We’ve opted to provide a bridging portal as this means it can work with any finance/accounts software - provided you can export your data to Excel. So, assuming you have the electronic records, we can help. If you’re a Microsoft Dynamics user (AX, Axapta, NAV and Navision) we can bring in our expertise to the whole process.
Not sure if your current version of Microsoft Dynamics will be “fixed” by Microsoft? We can give help and advice.
Workaround sounds easier!
Yes, for now, it will get you through the immediate requirement. But keep in mind that this is patching, and Making Tax Digital for VAT is just the start of HMRC’s plans to digitalise. Think long-term: the best strategy would be to plan a move to compliant software, with the aim to complete the move in the next two years.
Columbus's expertise can help you get compliant!