A Solution for Making Tax Digital (MTD) Compliance
What is Making Tax Digital (MTD)?
A new piece of legislation, to be introduced on 1 April this year, MTD is HMRC’s solution for UK business owners (or international companies with UK offices) to easily submit correct calculations and keep on top of their taxes.
HRMC’s long-term aim for MTD is for it to help reduce accounting errors by having a ‘digital link’ between a business’s software solutions (which store accounting records and invoices) and its own database.
Since we first published our blogs and advice pages on making preparations for Making Tax Digital (MTD), CBIZ has been inundated with further requests from worried business owners, which is why we’ve put together this post, to summarise the key information you need to get ready.
Who does MTD Affect?
Making Tax Digital (MTD) is designed for all UK businesses with a taxable turnover over £85,000. As of the new financial year, they will need to submit their VAT returns under these new guidelines, although there is a soft landing for the first year, to give companies time to update their systems.
Nevertheless, it’s vital that companies who fall into this bracket start making preparations now, because April 2020 will come around quickly, and HMRC will not be granting extensions beyond the one-year soft landing window.
What are the Implications of the Legislation?
The existing VAT return portal will be closed to any business which meets the MTD criteria, meaning that they must be able to access the MTD system and use it for their tax returns.
Once the soft landing period ends on 1 April 2020, any business not using MTD or which fails to submit its VAT return on time runs the risk of penalties being applied. HMRC have confirmed that there will be a scheme to apply points to non-compliant companies, with the financial penalty applied when a certain number of points have been accrued.
Based on existing penalties, which HMRC have outlined on their website but rarely used to date, non-compliant businesses are facing automatic penalties of:
- A minimum of £50, with daily rates starting at £5 (for no previous failures in the last two years) and up to £15
- Up to £400 for failing to file an electronic VAT return
- Up to £500 for failing to keep the VAT records required
Any business whose VAT periods run from April to April (and has a VAT period beginning on 1 April 2019) will be among the first to need to be MTD ready. The soft landing period allows businesses to copy and paste data from their existing VAT statements.
What Issues are Businesses Having?
One of the main issues that we’re seeing is that Microsoft is only releasing cumulative updates to Business Central, its all-in-one business enterprise resource planning system and management solution. While Microsoft are working to secure accreditation, they are currently only HMRC-approved for the two latest versions of NAV 2018 and Dynamics 365 Business Central
We also know that approximately 75% of people are using an unsupported version of Navision, which is causing them real problems with getting up to date and compliant for the MTD rollout. We’ve experienced a far higher volume of calls than usual at this time of year, from people who need to update or improve their software.
The Making Tax Digital (MTD) portal will be the only way for UK VAT registered companies to submit their tax returns as of 1 April 2019, and without access to it a submission cannot be made.
The obligation to have all records in a digital format, and to ensure this is up to date and compatible with MTD so a submission can be made is also causing a problem for some businesses.
The CBIZ Solution
The CBIZ MTD solution is recognised by HMRC and enables business to benefit from MTD VAT in all versions of Dynamics NAV (formerly Navision).
Because connecting systems to MTD can be a tough process, it’s unlikely that many companies will have their Making Tax Digital solution in place in time for the 1 April deadline.
As such, it’s important that you act now to meet the deadline, and CBIZ has the answer, particularly if you’re using an older or unsupported version of Dynamics NAV. We have developed a range of options, so no matter which version you’re using, we can ensure you’re able to submit your VAT return through MTD.
We provide an add-on solution for Microsoft Dynamics NAV (formerly Navision), so there’s no need to rely on a cumulative update, especially as the deadline is getting closer. It’s also a cheaper alternative to upgrading or moving to the supported version (although we can support both and typically recommend using the newest version).
Within both Dynamics NAV and Dynamics 365 Business Central, there is a standard (Microsoft) electronic MTD VAT submission functionality, which makes it quick and easy to complete your return – but for many this requires a significant software upgrade. An upgrade can take time, but if you enquire now, or have a slightly later filing date, it’s still the best option, although please note, it’s also the most expensive.
Alternatively, you may be using a third-party App to submit your VAT return (also known as bridging software) which has been approved by HMRC. If this is the case, we can help to create a bespoke export from whatever version you’re using, whether it’s Dynamics NAV 2013 RTC or Classic, to make things easier.
For the first year only, the soft-landing approach may allow you to copy and paste your figures to that third-party App directly from your Dynamics NAV VAT statement, but only if you want to make more work for yourself. The CBIZ MTD VAT solution allows you to do a simple VAT Return submission straight from your Dynamics NAV software, saving you time and making sure you’re 100% Making Tax Digital (MTD) compliant by 1 April 2019.