By now most VAT registered businesses in the UK will be aware that Making Tax Digital for VAT (MTD) came 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 are now 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 the nine boxes of the VAT return and press ‘send’. Under MTD, businesses are now required to use an Application Programme Interface (or API) to transmit the VAT return data digitally to HMRC.
Please note that HMRC has advised that a 6 months extension until 1 October 2019 will apply to the following organisations: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (such as government departments and NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. HMRC also confirmed that these organisations have until 1 October 2020 to meet the digital links requirements.
Preparing for MTD
In preparing for MTD, many businesses have reviewed their existing VAT processes, updating the software and generally getting ready for MTD. Finance Directors with responsibility for the submission of the VAT returns, 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 quarter ending 30 June 2019. 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 to HMRC for each VAT return. 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 any VAT adjustments made.
API VAT filing solution
Once you are comfortable with your systems, data sources and VAT adjustments, it will be time to focus on the VAT return digital 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.
Grant Thornton has 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 approved by HMRC and we are now listed as a software supplier supporting MTD for VAT on HMRC’s website. Our software can also be used by agents. It is available to download from MS Office 365 App Store (App Source).
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. You can also find a demo video for our solutionhere.
Please note that in order to activate the software, you will need to register with Grant Thornton for the service.
Digital links requirement
From 1 April 2020, businesses will be required to makes sure that they meet digital links requirements.
Please note that our software only provides an API connection to submit the 9 boxes of the VAT return. It does not deal with the digital links requirement for 2020. We would be happy to provide you with advice on how you can meet the 2020 requirements and review your VAT return workings and processes under a separate exercise.
Use MTD to create your future-fit tax function
More broadly, we are helping clients prepare for the future as MTD is rolled out to other areas, and tax authorities continue to demand more data, in more detail, more often, more real time. Our technology, automation and transformation team can help you set a tax data and technology roadmap and build efficient, proactive tax and finance functions. We can help ensure you are MTD compliant today and have the flexibility to meet future challenges. Our team of automation specialists and technology professionals can help you to make the best out of your existing systems and data, as well as implement new ERP/accounting systems, build data analytics platforms and workflow trackers, and help you implement emerging technologies such as robotics and machine learning. The team’s work can improve efficiency, reduce risk, increase data transparency, free up time, remove process bottlenecks and integrate Tax with the rest of the business – making the most out of the transformational opportunities that MTD offers.
MTD timeline summary
1 April 2019 – MTD came into effect for the bulk of businesses
30 April 2019 – first monthly VAT return due under MTD
30 June 2019 – first quarterly VAT return due under MTD
1 October 2019 – MTD comes into effect for the deferred group of businesses
31 October - first monthly VAT return due under MTD for the deferred group
31 December 2019 – first quarterly VAT return due under MTD for the deferred group
1 April 2020 – put digital links in place for the bulk of businesses
1 October 2020 – put digital links in place for the deferred group