MAKING TAX DIGITAL

With HMRC’s Making Tax Digital program coming into effect on 1^st April 2019 there have been questions raised as customers begin preparing their VAT returns, specifically related to when customers must file VAT under the MTD rules.

When must my VAT submission be made via MTD?

The Making Tax Digital rules apply from your first full VAT period starting on or after 1^st April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return. This means that most customers filing their VAT return in April, will not have to do so under the new MTD rules and can continue using their existing VAT posting process.

Below are some questions and answers to help illustrate:

Q: My VAT Return is for the quarter ending 31^st March, due for filing by the end of April. Will this Return be filed under the existing filing arrangement, even though it will be in April?

A: The MTD rules start for the first VAT period beginning on or after 1^st April 2019. So, you can submit the return for the period ending 31^st March 2019 via the existing portal.

Q: MTD for VAT is mandated from 1/4/19.  Is this for whole quarters from 1/4/19? And not any with April period within the quarters? So, Feb-Apr & Mar-May can still be filed using old system

A: It is from the first full VAT period starting on or after 1^st April 2019. The VAT returns for the examples you quote can be submitted via the existing portal.

Q: Can I just clarify dates…if my VAT return period is Feb to April, their first MTD return will be this one or May to July?

A: May to July would be the first one, in your example.

Q If we have several VAT registrations, and one is a group VAT registration, my understanding is that the group VAT registration is deferred, but the others are not. Would that be correct?

A: That is correct.  Companies that are part of a VAT group should have received a letter from HMRC notifying them of the deferral to MTD compliance.  Please contact HMRC if you are unsure.

Additional examples are available under section 2.1.2 on HMRC’s VAT notice.

Solution updates

Customers with an immediate MTD filing requirement who have registered for Avalara’s free MTD filer will be contacted directly by Avalara in the coming weeks with details on getting access to your dedicated version of the filer. If you require support to align your VAT return process to your chosen bridging software, please contact your Account Manager to schedule time with a finance consultant.

We are nearing completion on the development of the K3 solution called ‘K3 Digital VAT Live’ to comply with HMRC’s MTD 2020 requirement. This solution is being developed to work seamlessly with your SYSPRO ERP system.  If you have not already done so, please complete our requirements questionnaire to allow K3 Syspro to understand a little more about your business, to ensure that we have captured your business requirement.

Please note: The questionnaire needs to be completed by someone familiar with the SYSPRO solution and who is responsible for ensuring your VAT return is submitted.

Please check back here for updates.

Firstly we would like to thank you for your patience regarding the communication on Making Tax Digital. We have been evaluating what Making Tax Digital means to us and our customers with a view to making recommendations to satisfy the requirements defined by HMRC.

You may be aware that we have previously communicated the distribution of an advisory tool in an attempt to provide you with a solution based on the feedback. However, following further investigation we felt it more productive to streamline our approach in an attempt to simplify the available solutions.

At K3 Syspro we are committed to establishing expert partnerships to assist our customers, and in the case of making-tax-digital we have teamed up with SYSPRO partner Avalara. The software provider helps businesses comply with their international VAT and transactional tax obligations and the collaboration is another example of how the super powers offered by our solutions empower users to make digitalisation pay.

What does this mean for you?

If you are a UK VAT-registered company required to meet HMRC’s Making Tax Digital requirements for April 2019, Avalara have developed a free solution called the MTD Filer (an Excel plug in) to meet your needs.

Please note: Although K3 Syspro have partnered with Avalara, please be aware there are other approved providers should you wish to take another avenue.

If you are a VAT Group, what is the solution?

Based on our understanding, the HMRC guidelines have stipulated that Making Tax Digital legislation for VAT groups has been deferred until October 2019. K3 Syspro will be distributing a requirements questionnaire by Friday 25^th January with the aim to capture the individual complexities in-line with these requirements. This feedback will be reviewed internally and will assist K3 Syspro in defining the key activities and will endeavour to provide an update in quarter.

Will training be provided?

The solution being provided is a self-trained solution however Avalara will be making supporting materials available in the form of webinars and videos to ensure that you have the information required to be able to submit your tax returns digitally for April 2019 requirements.

When is this solution available?

Avalara are in the final stages of approval with HMRC which has taken longer than anticipated. Based on the latest communication we have received we are expecting this to be made available in the next couple of weeks.

What next?

If you are interested in moving forward with the Avalara solution, please select this link and complete the required fields to register your interest. Once the solution is available, Avalara will be contacting all businesses who have expressed interest to request your Company Name and VAT number. Avalara will then provide you with your own secure version of the MTD filer which will include the Company Name and VAT number you provided already populated and with the assistance of the supporting material, will enable your business with the ability to start your digital journey.

What is the solution for 2020?

The requirements defined by HMRC for April 2020 are more complex, and in order to ensure we are meeting your needs, we will be distributing a requirements questionnaire Friday 25^th January with the aim to capture the individual complexities in-line with these requirements. As the solution for your business may be dependent on a number of factors, this feedback will be reviewed internally and will assist K3 Syspro in defining the next key activities.

We have been working closely with tax industry leaders to provide K3 SYSPRO customers with the best options to comply with HMRC’s upcoming Making Tax Digital Program for VAT. Through our research, we have identified that each business can have unique tax reporting requirements. We are therefore putting together a Making-Tax-Digital Advisory tool that will guide you to what you need to do to be MTD compliant for the 2019 and 2020 deadlines based on the information you provide through a series of questions. We will be in touch mid January with a link to this advisory tool.

The HMRC have provided guidelines here for electronic submission of tax returns as part of their Making Tax Digital Program which is effective from the first VAT period following 1 April 2019.

Our understanding of this is as follows:

• From 2019 you must have a digital record keeping system in use for producing tax records. For SYSPRO customers you are already compliant because you run the SYSPRO ERP solution.
• From 2019, UK Businesses operating within the thresholds outlined above will have to submit their 9 box VAT return to HMRC via API using either a direct push from their core ERP system or a middleware software tool produced by a third party (such as an Excel add-on tool).
  You will not be allowed to transpose data into any portals manually. What you are allowed to do until 2020 is collect the underlying VAT data for posting using any digital mechanism i.e. Excel linked to an ERP Database, which you can then adjust for ‘off ERP’ VAT adjustment transactions – such as initiatives like ‘cycle to work schemes’ etc.
• From 2020 all links between the source ERP Tax Transaction and the HMRC VAT submission portal must be digitally linked in nature. So you will not be allowed to amend VAT figures in excel prior to posting.

We would like to understand exactly how our SYSPRO customers are currently creating their HMRC VAT returns to understand whether you are submitting figures direct from K3 VAT100 module (for older versions of SYSPRO) or the SYSPRO 7+ built in Tax Return Reporting which produces the 9 box tax return, or whether you are first adjusting figures in excel.

Please could you confirm this for us by filling in the following 1 question survey. The results will be posted here and updated weekly.

What do you need to do?

K3 are committed to providing our customers with help and guidance to ensure that you are compliant for MTD for VAT.

Andy Latham Chief Technology Officer has stated:  “K3 are currently developing a tax portal on our Imagine platform. The system will enable customers to submit data for HMRC VAT returns. Using K3 DataSwitch integration platform we would anticipate connections to most ERP systems along with functionality to load data via spreadsheets. The system is expected to provide data upload facilities, features for amending the data, preview VAT submissions, audit trails and reports.”

Pricing of the solution will be available once the tax portal has been developed.

Your needs will depend on who you are and your current process:

1. I am single ERP Company with a requirement to submit 1 VAT Return to HMRC:
   • If you currently transpose your 9 box SYSPRO tax return into the HMRC Portal without any adjustments, then for 2019 – you will need to partner with a solution provider that will allow you to instead pull the 9 box return straight from SYSPRO into a portal for you to review and post to HMRC. K3 will be providing a portal that you can push data into from January 2019.
   • If you currently amend the 9 box SYSPRO tax return (in Excel or other tool) prior to submission for ‘off ERP’ VAT Schemes, then for 2019 – you will still be able to do this, but you will need to find a partner or tool that allows you to map the 9 summary boxes in Excel and post them to HMRC or into a review portal. K3 will be providing such a portal to allow you to post from Excel to Portal to HMRC until 2020. Prior to 2020 you need to engage with us and find out how you get your current ‘off ERP’ VAT schemes posting back into SYSPRO as core transactions, so that they can be picked up by the VAT return reports and processed in SYSPRO.
2. I am a multi ERP / multi SYSPRO Company with a requirement to consolidate several 9 box returns into a portal that will allow me to submit a single VAT return against my single company VAT Number:
   • From January 2019 you will be able to pass these combined returns digitally into an Excel workbook (or other tool) – as long as you have an add-on for the tool that posts direct – you will be able to post from your own ‘excel model’ the tax return to HMRC. K3 will be providing a portal to allow you to post from Excel to Portal to HMRC until 2020.
   • Please note that for 2020 – you will no longer be able to do this and in 2019 you will need to engage a third party that can consolidate multiple ERP tax data or summaries into a single consolidated portal, which will allow you to review VAT by company, by ERP, in Total and include VAT schemes, prior submissions and view HMRC obligations. K3 will have a tax portal ready by 2020 that will allow you to do just that.
3. I am a multi ERP / multi SYSPRO Company with a requirement to submit VAT or other live tax data to multiple Countries governments that are already running a digital submission programs (Hungary / Spain / Italy / Latin America):
   • Whilst not really included in the scope of MTD for VAT, there is a requirement from our customers for a solution to the problem of posting multiple tax returns to multiple authorities. K3 has no intention of being the Global Tax submission experts outside of Digital Tax submissions within the UK.
     To this end K3 SYSPRO recommend that our customers engage with the global tax submission experts at Avalara to quote for any particular global tax submission requirement: https://www.vatlive.com/

We will continue to keep you updated via this blog and our customer newsletter.

The last update statement on the Making Tax Digital for VAT program was made available on 13th July by HMRC. Although the MTD scheme was not deferred as the analysts originally expected, HMRC have deferred full digital submission and backed down slightly on their aspiration by allowing a year of ‘soft landing’ for submissions – this effectively means you can log on to the new HMRC portal and copy and paste the 9 box Tax return from Excel into the HMRC portal without any risk of reprimand from HMRC.

It’s only from the following year (2020) that a direct software submission will be compulsory.

The 13th of July update and subsequent access granted to the development portal has empowered the software world with the knowledge they need to make the necessary software arrangements to assist their customers with understanding & planning for the change.

There are several fundamental points for businesses and ERP vendors to consider, these will be explored in the next update in September 2018.

Most businesses have a single VAT number and are required to perform a submission of a single 9 box VAT return, but:

• If the business runs multiple companies or ERP systems which then generate multiple VAT Return reports, the VAT reports then need to be consolidated into a single auditable submission.
  1. This may mean the SYSPRO ERP solution cannot carry the burden of submission as it has no awareness of other ERP’s VAT statuses.
  2. It may be that a middleware product is required to pull the information from multiple ERP’s, then provide a summary for posting.

We will be exploring these options, plus the requirement to collect and post VAT returns digitally into other EU Digital VAT solutions, such as Spain, Hungary & Italy who have already moved to more detailed levels of digital tax and record submission.

We hope to have the next update prepared for the September K3 Customer Newsletter and will be making further announcements at the K3 Customer event in Coventry in October.

We are starting to receive an increasing number of enquiries asking for confirmation of what K3 and SYSPRO are planning to do in order to assist Businesses with the UK Governments ‘Making Tax Digital Program‘. You will find more on the program here.

The aim of the initiative is to provide businesses of a certain size with the ability to submit their VAT returns electronically from the 2019 Tax Year. The solution is planned to provide the future foundation for UK Digital Tax submissions.

Following the announcement by the UK government’s Public Accounts Committee into HMRC’s performance in 2016/17 there is currently speculation around when the solution will actually be available, the report noted that the “HMRC’s transformation program is not deliverable as planned due to unrealistic assumptions,” and “HMRC again told us that it is not credible to continue with its transformation program as it is.”

At present a mechanism for submitting VAT data is not available to test and the assumption now is that the initiative will not be available until 2020.

What we can confirm is that SYSPRO by design has the inbuilt capability to extract electronic data using the IMPQTS business object and once the MTD platform is available we will have solutions available to allow SYSPRO Businesses to submit their VAT data in a controlled and valid way.