MTD is HMRC’s digitised tax system for VAT, Income Tax Self Assessment and Corporation Tax to ensure both individuals and businesses get their tax right and keep on top of their affairs. The main goal is to make tax returns simpler and more efficient for everyone – making paper records and spreadsheets a thing of the past.
As of April 2022 all VAT-registered businesses in the UK must keep digital records and make VAT submissions to HMRC via ‘compatible software’, such as SAP Business One.
MTD Compliance – Getting Ready
The Government Gateway lets you use many national and local online government services safely and securely. Once its set up you can use it to pay taxes, check your tax account status and receive updates and alerts from HMRC.
If you have not already created one you can set up your account at www.gateway.gov.uk making sure that you have the following information to hand:
• Your name
• Date of birth
• National insurance number
• Email address
You will be asked to create a password. Once the process is complete, you will get a user ID, which you can use to access the services you want (such as MTD for VAT). HMRC will send you an activation code in the post and you will only be able to progress to the next steps once you enter the code.
If you already have a government gateway account and you have decided to use MTD to submit your next VAT periods, you will need to notify HMRC of this change. An email will be sent as a confirmation of this modification. Once you have signed up to submit your returns via MTD you will not be able to submit your return manually after this as this step is irreversible.
SAP Business One and Making Tax Digital
MTD functionality consists of five main areas that will build the process of the user’s VAT submission to HMRC:
1. BAS Code Definitions
BAS Code definition works in a similar way to Tax Declaration Boxes. If upgrading, BAS codes are automatically created on a one-to-one basis from Tax Declaration Boxes, retaining the relevant details and settings. Declaration format templates are also upgraded. This is a great opportunity to review and if required make changes to your VAT codes, particularly if you import goods from abroad.
2. BAS Report Generation
BAS Report Generation behaves in a similar way to Tax Report Generation functionality. BAS Report Generation allows documents and transactions to be associated with a given reporting period in the familiar Box 1-9 breakdown. Correctly configured, this report allows you to reconcile your VAT ledgers, providing the values to journal from your input and output accounts to your VAT control account.
3. BAS Report Retrieval
BAS Report Retrieval allows you to open and review the latest BAS report (original or replacement) saved from the generation process. This is the also the step you will use to “Export” your reconciled VAT return to HMRC, linking a BAS report in SAP to an open obligation with HMRC.
4. Electronic Document Monitor
The Electronic Document Monitor shows the details of electronic communication between SAP B1 and the Government Gateway at HMRC. Four View Types are available representing the different mandatory and optional MTD processes, different information is displayed depending on the view type chosen:
• VAT Obligations
• VAT Declarations
• VAT Liabilities
• VAT Payments
In the VAT Obligations view, it is common to see the current and next VAT obligation as “Open”, as well as any previously submitted obligations as “fulfilled”. Switching to the VAT Declarations view allows you to confirm and review the values exported to HMRC, these values will be reflected on the HMRC portal.
5. Messages and alerts window:
Messages and alerts are an important part of the MTD submission process, messages are displayed to alert the user when new obligations are due to be submitted to HMRC or when a return has been received by HMRC.
For more information on how SAP Business One can you help digital transformation in your business, get in touch today.