When is a phase 2 not really a phase 2?
When it's just the end of the period where the need for 'digital links' was not actually enforced. Making Tax Digital for VAT (MTD) happened a while ago now, then 2020 brought Covid and Brexit , which took our attention. But, some companies may need to take a new look at the legislation and their use of their ERP or finance systems.
What is the issue?
The key principle of MTD is that a business reports its VAT to HMRC via a secure connection. The data used on this VAT Return may have come from multiple systems, which is fine, in fact, it is necessary in some cases, for example, VAT Groups using different systems in different parts of the group. What matters is that the data being transferred from different systems needs to be moved around using 'digital links' - which essentially means no manual intervention. You can't just copy and paste it in.
So, what changes?
For a VAT Return Period starting on or after 1st April 2021, you must use digital links to transfer the data. Follow this link HERE and see Section 184.108.40.206 of VAT Notice 700/22. This states, "Businesses will not be required to have digital links between software programs until their first VAT Return period starting on or after 1 April 2021". Well, April is now just around the corner.
What does it mean for users of Microsoft 街霸5 or Dynamics 街霸5 Business Central?
Well, anyone using Business Central SaaS or version 14.4 onwards of the on-premises version of Business Central, your system will already have the appropriate features to let you report from the system. Companies running NAV 2015, NAV 2016, NAV 2017, NAV 2018 or earlier versions of Business Central (BC13 and early releases of BC14) need to have had a CU rollup applied to their system to update the features.
We are on an older version, can we still use our 'Bridging Solution'?
Yes, but with conditions... Any customers not rolled up to the latest CU or on older versions of NAV (pre-2015) can continue to use their 'bridging solution', but they can't just copy and paste the info into it like they probably were doing. They have to use digital links, like our MTD Export tool, or a JET report, or SQL query - it doesn't matter what as long as its not manual copy and paste. The bridging solution is just a spreadsheet in most cases, so it simply needs to be reviewed to check that the data is being imported into it from an appropriate source like an .xml file. The spreadsheet then uses formulae to link the data together prior to submission.
We are a VAT group, any issues to consider?
Yes. The previous release of the MTD software for both NAV and Business Central was only capable of submitting for a single VAT entity, not a VAT Group, so bridging solutions were still required. With the release of BC17, this changed. It requires some setup but can now submit for a VAT Group. This functionality is being released for some older versions of NAV and Business Central.
To discuss a rollup or upgrade, please contact your Account Manager. If you are using a bridging solution and need to start using digital links properly, then arrange a demo of our MTD Export Tool via your Account Manager.