An API to HMRC is mandatory from 1 April 2019. HMRC will, however, introduce a soft landing period' until 1 April 2020. Taxpayers will, in the end, have to transfer data without manual intervention.
Re-keying of large amounts of data and using copy/paste functionality will be forbidden. When Taxpayers use flat files such as CSV files and automated downloads, this may be satisfactory for the ‘digitally linked’ requirements. A proper VAT configuration of a company's tax determination logic is thus crucial for being MTD compliant.
Digitalization of tax is a trend, so more countries will follow soon. Every jurisdiction has its country-specific way and tax requirements. Countries have implemented e-invoicing with (almost) real-time electronic data submission or SAF-T based methods.
The latest tax gap figures published by HM Revenue and Customs (HMRC) show that many otherwise compliant businesses have difficulties to keep their taxes right.
Errors and mistakes, which contribute to this tax gap, are found in every sector with over £9 billion lost annually in tax.
Making Tax Digital will provide a more modern, digital service which will help businesses get their tax right, with technology making it easier for them to do so. Using Making Tax Digital will not only reduce the tax gap but also reduce the costs when HMRC is forced to intervene to put things right.
From April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep records digitally (for VAT purposes only) and provide VAT return information to HM Revenue and Customs (HMRC) through Making Tax Digital (MTD) functional compatible software on a quarterly basis.
Businesses need to keep all their records in a digital format by law. HMRC will then be able to get direct access to the accounting system or via bridging software through application programme interfaces (APIs).
Businesses will still be able to submit monthly and non-standard returns under MTD. MTD will be available on a voluntary basis to other businesses, for both VAT and Income Tax. Businesses in scope for MTD must use functional compatible software which can connect to HMRC systems via API Interface. The functions of the compatible software must include:
- business name
- place of business and VAT registration number – also including information about which VAT accounting schemes is used
- the VAT account – the audit trail between source data and VAT return - that each VAT registered business must keep information about supplies made and received
Content of digital records should contain:
- keeping records in a digital form as required by the regulations
- preserving digital records in a digital form as required by the regulations
creating a VAT return from the digital records held in functional compatible software and providing HMRC with this information digitally
- providing HMRC with VAT data on a voluntary basis
- receiving information from HMRC via the API platform in relation to a relevant entity’s compliance with obligations under the regulations
By 2020 most businesses will be required to keep their tax data digitally and may be requested to keep digital records and update HMRC quarterly for Income and Corporation Tax.
Detailed MTD requirements are not yet available or thoroughly tested. HMRC has indicated that further details will be available from April 2018, including a test pilot program.
SAP add-on for MTD UK for VAT obligations 2021
KGT SAP add-ons for SAF-T, e-invoicing and MTD UK for VAT work as a standalone application within the SAP system and does not change existing customer SAP functionality or processes. It is fully configurable with custom namespace /KGT.
KGT partnered up with SAP regarding 'SAP Advanced Compliance Reporting for SAP HANA'. The 'Advanced Compliance Reporting' (ACR) service enables you to configure, generate, analyze, and electronically submit statutory reports that contain indirect taxes, such as value-added tax.
KGT provides also S/4 HANA transformation support.