Making Tax Digital – Our VAT filing solution

We hope and anticipate that most VAT registered businesses in the UK are aware of the impending implementation of making tax digital for VAT (MTD) – which comes into force on 1 April 2019.

The introduction of MTD is probably the biggest operational change to be introduced in the UK’s tax system in the last few decades. Nearly all VAT registered businesses in the UK with a turnover above the VAT registration threshold will be required to submit their VAT return details by using an approved digital interface. This is not to be confused with the current ‘online filing’ which simply requires a business to type in the details for nine boxes of the VAT return and press ‘send’. Under MTD, businesses will be required to use an Application Programme Interface (or API) to transmit the VAT return data digitally to HMRC.

Getting ready for MTD

Many businesses are yet to confront MTD, but with only six months or so to go, there is little time available for preparation and testing. As a finance director with responsibility for the submission of the VAT returns, you need to start asking some key questions and formulating MTD readiness plans.

The first VAT return affected by the new rules will be due at the end of May 2019 (covering the month of April). The first quarterly return under the new MTD regime will be due at the end of July 2019, covering April, May and June. By the time the first VAT return is due, you will need to be confident that your VAT reporting system provides accurate information so that the correct numbers are transmitted for each VAT return to HMRC. This provides a unique opportunity for all businesses to take a really close look at their current systems and to evaluate whether there are any gaps that need to be filled.

Accurate and timely data

The production of a VAT return requires accurate and timely data. How confident are you that the current system produces reliable numbers from the correct sources? Do you need to make any adjustments to those numbers and can any of those adjustments be automated to remove the chances of human error?

Very few businesses can prepare a VAT return without making some form of adjustment to the raw data. For example, some businesses make adjustments to their input tax figure to take account of partial exemption or Capital Goods Scheme adjustments. Other business might need to adjust their output tax to take account of fuel scale charges or to declare output tax on reverse charges from overseas suppliers of services.

In the new world of MTD, HMRC will initially require information on the nine boxes of the VAT return. However, in time businesses will also be able to submit supplementary data on a voluntary basis to HMRC, which will include summary information on the VAT adjustments made.

API VAT filing solution

Once you are comfortable with your systems, data sources and VAT adjustments made, it will be time to focus on the VAT return submission requirement. The changes required by the new MTD regime will require careful thought. There are a number of solutions available to businesses. Finance Directors should choose a solution that fits their system rather than seek to fit their system to a solution. This will require consultation with either internal IT managers or with third party software providers.

We have developed a VAT filing solution that can easily bolt on to your existing VAT working Excel spreadsheets, which will allow submission of VAT returns via an API link to HMRC. Our solution has been tested and we are now listed as a software supplier supporting MTD for VAT on HMRC’s website.

Once set up, our solution enables users to be just four clicks away from being able to submit their VAT return data to HMRC. If you would like to see our MTD filing solution, we would be happy to arrange a demonstration and to discuss your MTD requirements in more detail. Please contact our indirect tax team for more information.

Contact the team

Tax technology

Andrew Burman