Making Tax Digital

The Making Tax Digital for VAT takes effect from 1st April, 2019 and will affect a large proportion of VAT-registered businesses. Here we'll take you through what you need to know and how you can use your Dynamics NAV / 365 Business Central system to comply!

MTD - Will it affect me?

First off - will it affect me?

If your organisation is a VAT-registered business with a taxable turnover above the VAT threshold (i.e a turnover above £85,000) then you will be required to use the Making Tax Digital service to keep records digitally and use software to submit your VAT returns from 1st April, 2019 onwards.

The exception to this is for a small minority of HMRC customers who fall into one of the following categories: 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 (government departments, NHS Trust), local authorities, public corporations, traders based overseas, those required to make payment on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers. For these customers, HMRC will be delaying mandation until 1 October 2019 to ensure there is sufficient time for testing the service with them in the pilot before they are mandated to join.

Can I do this through my Dynamics NAV / 365 Business Central system?

In short, yes. HMRC is maintaining a list of software products that support Making Tax Digital and Dynamics 365 Business Central and Dynamics NAV are on that list. This means that the HMRC has been presented with a demo of the solutions and has confirmed tests integrating Dynamics NAV and Dynamics 365 Business Central to their APIs.

Talking you through the options!

If you are on either Dynamics 2018 and Dynamics 365 Business Central then your system already has all the necessary MTD functionality included. (Hurrah!)  If you are on an earlier version of Dynamics NAV (i.e prior to Dynamics NAV 2018) you will need to decide on your preferred route to become compliant. 

Check out this video which talks you through the various solutions we offer to help with this. We also cover what the MTD requirements are, the HMRC's MTD roll-out timeline and clarify what exactly a 'Digital Link' is!

Watch the video here

Use the MTD Excel Bridge!

The MTD Excel Bridge is an excellent, quick and cost-effective way for you to become MTD compliant and can be used with all versions of Dynamics NAV and 365 Business Central.

It allows you to install an Excel add-in, giving you the ability to transmit your VAT Returns to HMRC directly from Excel. In order to be fully MTD compliant you need to be able to get your VAT information into Excel in an automated way - we recommend that you use Jet Reports to achieve this automation. Our MTD Excel Bridge add-in has inbuilt integration with Jet Reports to make this even easier for you. (If you don’t have Jet Reports then you’ll need to find an alternative mechanism to pull the relevant data into Excel).

How much does it cost?

£300 per organisation per year. You can purchase it via our online shop here

What versions of NAV, Business Central, Excel & Jet will it work with?

- All versions of Dynamics NAV and Dynamics 365 Business Central
- Excel version 2013 or later
- Works with Jet Reports (but not Jet Basic - which is the free version).

VAT Statements

In order for the MTD Excel Bridge to work you will need to have VAT Statements in your Dynamics NAV / 365 Business Central system set up correctly and be using them.  We offer financial consultancy if you need help with setting up your VAT Statements.

Accessing the MTD Excel Bridge

You can purchase the MTD Excel Bridge though our online shop or via your account manager. Once purchased we will email you the MTD Excel Bridge file which will include instructions for install and use.

Watch how the Excel Bridge works

Fancy something a bit more integrated?

If you would like a solution which is fully integrated into your Dynamics NAV system – meaning you can quite simply click a button and submit your VAT information directly from Dynamics NAV to the HMRC (not a spreadsheet in sight) - then we can help you with that too.

We would do this by implementing MTD components from the latest Microsoft Cumulative Update for Dynamics NAV into your system. This approach is possible for Microsoft supported versions i.e NAV versions 2018, 2017, 2016 & 2015. Alternatively, if you would like the entire Cumulative Update to be applied to your system then we can arrange that for you as well.

If you are on Dynamics 2018 or Dynamics 365 Business Central your system already has the necessary functionality included so you are good to go!

View the Microsoft MTD functionality
MTD - What do the Making Tax Digital features in NAV and Business Central look like?

What do the Making Tax Digital features in NAV and Business Central look like?

Dynamics NAV and Dynamics 365 Business Central are on HMRC's list of software products that support Making Tax Digital which means that the HMRC has been presented with a demo of the solutions and has confirmed tests integrating NAV and BC to their APIs.

The features which support compliance are:

  • Visibility into your VAT obligations
  • Creating VAT returns based on VAT obligations
  • Reminding users of upcoming VAT obligations
  • Submitting the VAT return to HMRC
  • Viewing your VAT liabilities and payment
Learn more about the features
MTD - Ducks in a row

Get your ducks in a row!

Dynamics NAV and Dynamics 365 Business Central offer features to help you with your MTD compliance but in order for these features to work you will need to already be fully managing VAT through your system.

VAT Notice 700/22: Making Tax Digital for VAT’ is the HMRC’s explanation of the MTD for VAT requirements and guidance on how businesses must apply.  However, it’s a bit of a dry read (to say the least!) so we’ve simplified it to the below questions which highlight the kinds of things that you need to be thinking about to get all your ducks in a row prior to software implementation.

If you answer ‘no’ to any of these questions you may need financial consultancy (which we can help you with) in order to make changes to your system set-up / business processes to allow the MTD functionality to work.

Questions to ask yourself:

  • Is your VAT statement set up in Dynamics NAV / 365 Business Central?
  • Do you calculate and post your VAT settlement in Dynamics NAV / 365 Business Central for each return period?
  • Do you submit the exact Box 1 to 9 numbers from the VAT statement which Dynamics NAV / 365 Business Central has calculated?
  • Do you agree your VAT statement to your General Ledger each month end?
  • Does your VAT statement use standard functionality?
  • Are you in a group VAT scheme? If yes, then MTD for VAT does not apply until 31st October 2019.
  • Do you have a Government Gateway Account? (If not you should set one up as soon as possible - learn more on that here!)
  • Are you in a standard VAT scheme? i.e quarterly or monthly reporting and settlement?

Helpful definitions:

Digital links

A digital link is an electronic or digital transfer or exchange of data between software programs, products or applications. The use of ‘cut and paste’ does not constitute a digital link.

If a set of software programs, products or applications are used as functional compatible software there must be a digital link between these pieces of software. This digital link is required where the data to be included in any of the boxes of the VAT Return has been prepared within a software program, product or application, and this data is then transferred to another program, product or application in order to submit the VAT Return data to HMRC via the API platform.

For VAT periods starting on or after 1 April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.

The Government Gateway

The Government Gateway is the website you use to register for online government services. It is an important part of the government's strategy of delivering 'joined up' government, enabling people to communicate and make transactions with government from a single point of entry.

VAT records

Records you must keep include:

  • Copies of all invoices you issue
  • All invoices you receive (originals or electronic copies)
  • Self-billing agreements - this is where the customer prepares the invoice
  • Name, address and VAT number of any self-billing suppliers (so not required if not self-billing)
  • Debit or credit notes
  • Import and export records
  • Records of items you can’t reclaim VAT on - e.g. business entertainment
  • Records of any goods you give away or take from stock for your private use
  • Records of all the zero-rated, reduced or VAT exempt items you buy or sell
  • A VAT account