Digital transformation is the buzzword surrounding just about all industries at the moment. If you don’t have a centralised data system or a core digital structure, chances are you will soon and this is no different for HMRC. The government is making changes to modernise all aspects of financial processes, starting with the way both individuals and businesses pay taxes, moving everything to an entirely digital, standardised process. This is part of the HMRC’s aim to become one of the most digitally advanced tax administrations in the world.
The first step in HMRC’s plan is the initiative they’ve called Making Taxes Digital (MTD) which requires all businesses over the threshold of £85,000 to meet a set of VAT obligations, including the way they record, monitor and pay taxes. This will automate the process, making it easier and more efficient for users, allowing for fewer mistakes and ultimately allowing HMRC to collect more information.
VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.
HMRC has stated that they will not be provided an exclusive platform on which they'll expect people to use to comply with these changes. Instead, businesses will be using compliant finance or ERP software to connect their taxes directly to HMRC.
Making Tax Digital requires all VAT registered businesses to:
Keep digital records for VAT purposes
Provide VAT return information to HMRC with Making Tax Digital compatible software and not through the current HMRC portal
HMRC will not continue to roll out other returns policies before VAT has been proven successful and is embedded in common tax procedures.
How will this affect Microsoft Customers?
Microsoft have been working alongside HMRC and advisory groups in the UK to ensure that their products fully facilitate the Making Tax Digital initiative. Although Microsoft Dynamics already supports the electronic submission of VAT reports, measures are being put in place to ensure that UK versions of Microsoft Dynamics comply with upcoming regulations so that current users remain compliant under their Microsoft Lifecycle Policy.
What does this mean for Dynamics Users?
If you're currently running Dynamics AX 2012 R3 or Dynamics 365 Finance and Operations, you'll receive an automatic update from Microsoft to ensure compliance.
However, receiving the update alone will not ensure compliance. There are a small number of adjustments, such as report formatting and capturing the right data which will need to be in place to comply with regulations. This is where your partner should be able to advise you through the transition.
In addition, by April 2020, you will need to ensure that all of your processes are fully digital.
What if you're running an older version of Microsoft Dynamics?
Older products which are not currently supported will not receive the automatic update, meaning further action will need to be taken to fulfil HMRC requirements.
Syscom will work with all customers on older versions to ensure compliance with the HMRC regulations. We will of course keep you updated with progress as and when the solution is ready to release in advance of the deadline on the 1st April 2019.
What can Syscom do?
We are awaiting updates from Microsoft about when this update will take place once they've ratified the requirements with HMRC. As a Microsoft partner, we will help our customers work through how best to approach Making Tax Digital.