Making Tax Digital – Be prepared
It is now just a few weeks until it becomes mandatory for all businesses above the VAT threshold to start keeping their business records digitally and submitting their VAT returns using MTD compatible software. On this page you will find to up date information on the work RedSky is doing to ensure all RedSky software can support MTD.
5 February 2019
RedSky receive HMRC final stage approval for Summit MTD VAT Return submission. Summit will now be added to the ‘Available Now’ list of software on the HMRC website. See www.gov.uk/guidance/software-for-sending-income-tax-updates#VAT
28 January 2019
Summit pilot customers are upgraded to allow end-to-end test of new VAT Return functionality.
11 December 2018
Keith Noddings, Finance Director at FT Group, provides the latest update from the MTD Special Interest Group (SIG).
In terms of where we are now, we have made major progress towards the April 2019 go-live date.
- Journals now flow into the VAT Returns
- A facility has been created to generate a Group VAT Return
- Additional VAT codes have been set up for EC transactions
- There’s now the option to run the VAT Return by period or by date
- Redsky is now working with a client to submit test data to receive HMRC accreditation for the software
- Further work is under way, regarding reporting possibilities through the Dashboard.
Overall, from where we started in April 2018, I believe the progress made in eight months has been excellent. There is still work to do, but we are on the right track.
I would definitely recommend any user who believes they can add valuable input to the development of the system to get involved in future SIGs.
7 December 2018
During the SIG, attended by representatives from Colas Rail, Cormac, Midas Group, Gardiner & Theobald, and FT Group, the latest developments around the production of the VAT Return within Summit were reviewed. Areas demonstrated included:
- Routines created to aid the onboarding process, including programs to set the status of data ready to be included on VAT Returns.
- Processing VAT within Summit including VAT Journals & Journal Import
- supporting various scenarios, and processing EC Inputs and Outputs.
- Creating and Submitting a VAT Return
The session also included a demonstration of the optional RedSky VAT API Submission module, which customers can use to send the VAT Return to HMRC.
12 November 2018
The next meeting for the Special Interest Group has been booked for Thursday 6th December. This is to review progress with the developments to Summit to support MTD.
15 October 2018
RedSky’s VAT API Submission module is added to HMRC’s ‘white list’ after receiving stage one approval. The next stage is customer pilots.
10 October 2018
Verna Gellvear, from HMRC’s MTD Customer Readiness and External Stakeholder Team (CREST), spoke at this year’s RedSky User Group Conference
Verna’s session at CONNECT2018 encouraged companies to prepare for MTD, which will be implemented from April 2019.
As well as background information about what MTD is and why it’s being introduced, Verna’s presentation included a wealth of details on the various VAT Notices that HMRC has published, to help companies understand what they will be required to do under the new arrangements. You can view HMRC slides HERE.
6 September 2018
Keith Noddings, Finance Director at FT Group, reports on the work of the MTD Special Interest Group (SIG).
There are a number of changes being introduced by HMRC in 2019, the first being the introduction of Making Tax Digital (MTD) in April next year. Companies will have to maintain digital records using MTD-compatible software and then submit their VAT Return automatically to HMRC via API-enabled software.
My initial understanding was that there was to be no facility to amend the system-generated VAT Return, so what had to be submitted had to be accurate and complete. My concern was that the current system-generated VAT Return had a number of flaws and couldn’t be relied upon to produce this information. I was worried that without fully understanding users’ issues, RedSky would just follow a given set of requirements by HMRC, and that their developers would make changes to the system, thinking they were adequate… and that when the changes were rolled out into the live environment, they would not be appropriate.
The issue for employers is that if the submissions are inaccurate or incomplete, it is the employer who gets penalised, not the software company. I was concerned that a lot of work needed to be done by RedSky just to get the current system-generated VAT Return up to standard, even before thinking about how it could be submitted to HMRC. This was never going to be achieved without the input of the end user – us, the customer.
That was my motivation for pushing for the creation of the MTD SIG: I wanted to express my thoughts on the software and how I felt it could be improved. I wanted to influence what would be developed by RedSky. I felt that the other large changes over the last few years, such as online submission of CIS Returns, RTI and Auto Enrolment, had not been created in Summit in a user-friendly manner for the end user and I didn’t want this to happen for MTD.
Currently, the customer downloads the system-generated VAT Return into Excel and makes manual adjustments within Excel for things like bad debts, private use, partial exemption and so on. Having done that, they complete the VAT Return using the current Government Gateway, manually keying the VAT Return details onto the online portal. This works fine for me because as the end user I have total control over the submission and accuracy of the Return.
But as soon as you are reliant on the software to run the Return and submit it automatically to HMRC, you lose that control: you press a button and it’s gone. And if it’s not correct, who’s to blame? Well it’s us, the customer, so it needs to be right.
We’ve had two MTD SIG meetings so far, in April and August. In the first one we were very much finding our feet and didn’t necessarily have the right people in the room. But the second was much more productive, partly because RedSky brought along more experienced members of its team. Here’s a round-up of what we’ve covered and achieved so far.
- How do we deal with Journals? Accounting systems are rife with Journals, which enable you to correct figures. Currently any Journals don’t flow into your VAT Return, which is why you currently make the manual amendments in Excel. But HMRC doesn’t want anything coming from Excel; all the information must come directly from the system. Journals don’t form part of the new VAT Return arrangements, so there’s a big question mark over how the system will deal with things like: Partial exemptions, Sales to other EU countries, and Adjustments for bad debts.
- What’s the plan regarding the creation of VAT Returns? Do we do create them by period or by date?
- How can we improve the reporting mechanism? We’re looking at the whole VAT reporting mechanism. How easy will it be to check the accuracy of the report, by comparing it back to your accounts and your trial balance? The current reporting facilities are quite difficult to understand, so we’re discussing how we can we improve them. When the time comes for you to press that button to send it off to the Revenue, you want to be confident that it’s right.
- What about groups? I work for FT Group: we have five trading companies, but a single VAT registration number spanning the group. At the moment, we run five individual VAT Returns, then I put all the information into Excel and total it up into one group figure, which I then key into the website and send off. But now HMRC wants one automated VAT Return. How will the system fulfil that requirement?
- How do we integrate third-party software? When companies acquire lots of other companies, they often end up with many different types of software within the group. Yet they all fall under the one group registration number. How do you incorporate the VAT from another piece of software that doesn’t belong to RedSky? You need to do this in order to consolidate the figures and send the automated VAT Return to HMRC, but how can it be done?
These are the sort of things that the MTD SIG has been discussing. There’s no easy fix, but
being part of these SIG meetings enables open discussions and makes everyone realise what needs to be done. The reaction from RedSky has been positive; they see the benefit of it, for both parties. And for our part, we as users get to understand a little bit about the complexity of making changes to the system.
6 August 2018
The latest news on Making Tax Digital for Business
The government is making fundamental changes to the tax system, to make it more effective, efficient and simple for taxpayers. These changes will also help prevent errors and mistakes that are estimated to cost HMRC more than £9 billion in lost tax every year.
Making Tax Digital (MTD) for Business is the government programme designed to start plugging this tax gap and help businesses get their tax right.
As the first step on that journey, from April 2019 VAT registered businesses that have an annual turnover above the VAT threshold (£85,000) will be required to keep their records digitally (for VAT purposes only). They will have to provide their VAT return information to HMRC every quarter, using HMRC-approved, MTD-compatible software, and they must store their VAT records digitally for six years.
Although initially these businesses have to submit quarterly VAT summaries that are really just headline summary totals, in time it’s expected that this requirement will expand to include all transactional data.
More information is available at www.gov.uk – simply type ‘Making Tax Digital’ in the search box.
RedSky is developing a solution
RedSky has a solid understanding of the MTD requirements. We are an active member of the British Application Software Developers Association (BASDA) working group, which has been making an important contribution to the government’s lengthy MTD consultation process.
We have developed an API (application programming interface) that will allow our users to record their MTD information in the correct format and submit it to the government website. It’s currently being tested by our parent company, JDM Technology Group, after which it will go to HMRC for approval.