As of the 1st April 2019, the Government will be launching a new legislation and introducing a new initiative that will affect the way you, as a business, submit your tax returns.
Known as the Making Tax Digital (MTD) initiative, this new HMRC legislation will affect the submissions of all VAT returns, effective April 2019. Instead of the traditional methods of submitting your VAT and tax returns, and in a bid to move ahead with the times and evolve as one of the most digitally advanced tax administrations in the world, you will now be required to submit all returns electronically.
What is MTD?
Making Tax Digital is a key part of the Government's plans to make it easier for individuals and businesses alike to ensure their tax returns are correct and help to keep on top of their financial affairs.
The MTD initiative is set to make fundamental changes to the way the taxation system works in an effort to transform tax administration so that it is:
- More effective
- More efficient
- An easier process for tax payers to get their tax right
According to HMRC, as of April 2019, all VAT-registered businesses will be required to use the Making Tax Digital for Business software to submit their VAT returns and meet their VAT obligations. This applies to businesses that have an annual turnover above the VAT threshold - currently set at £85,000. Smaller organisations who don't meet this will not be required to use the system, although they can do voluntarily should they wish to take a more modern and digital approach to the way they complete their tax returns.
If your business calendar works in 'VAT quarters', the submission for the quarter running 1st April - 30th June 2019 will need to be the first one that is submitted electronically on 7th August 2019 and then subsequently each quarter thereafter.
How will MTD affect your ERP system?
Throughout this transition, the Government will remain committed to ensuring all businesses are supported in getting their tax right and reducing the amount of tax lost through avoidable errors. And in order to make the move over to this new system as seamless as possible, the Government have instigated that there will be a "soft landing" approach. This will mean that for a short period of time, bridging software will be accepted to allow the VAT return to be uploaded from an approved spreadsheet based software.
So, for users of the Infor XA ERP platform, this could simply mean all you need to do is transfer your tax lines onto a spreadsheet, summarise these into various VAT boxes and then use the approved Infor bridging software to upload on to the HMRC system.
There are a number of approved suppliers listed on the HMRC website who are able to help you manage this change and help transition over to the new digital tax system. The full list can be found here.
In the long term though, it is anticipated that the new HMRC legislation will require transaction level information from the ERP system. As an approved supplier, and longstanding partner of In2grate, Infor's Local.ly Services Platform has been approved by the Government as a means to upload tax returns to the HMRC system.
As we have such a close relationship with Infor, this means that we are able to help you to implement a sustainable and streamlined system that will help you to effectively manage this new approach to digital taxation.
Infor are currently in the stages of finalising the mechanism by which you will be able to select transactions that will need to be included in each of the required fields. This development will facilitate the selection of tax lines generated by IFM/E Financials for inclusion in each of the boxes on the VAT return submission form. Users will then use the Local.ly Services Platform to upload the completed form on to the HMRC system.
It is expected that this will be available in June 2019 and is intended to meet the long-term requirements set out by the Government as part of the MTD initiative.
What is the Infor Local.ly Services Platform?
Infor Local.ly Services is a platform that provides localised reports and electronic messages for tax reporting, amongst many other areas. It gives users a simple way to keep ERP systems accurate and up-to-date and streamlines the process of keeping your ERP system current for complete regulatory compliance.
As a HMRC approved software, the submission of VAT returns can now be done using the Infor Local.ly Tax Authority Connector meaning that your ERP systems and and tax returns remain compliant.
So how does it work?
The extraction of VAT details and the creation of the XML required by the Infor Local.ly UK Tax Authority Connector will be done for you by the In2grate MTD tool. There are a few hardware pre-requisites that are needed for this to work however and these are:
- Windows 2012 R2
- Single Core
- 4GB Memory
- 50GB Disk Drive
The In2grate MTD tool will then be able to run as a service on the same server. The setup for the XML generation will be done in Infor XA using In2grate business objects.
We will be hosting a webinar and demo of this solution for anyone interested in April and will be posting more information around this in due course. You can register your interest in attending the webinar by clicking the link below:
What else do you need to consider?
Due to the flexibility of the tax tables in IFM/E Financials, the selection of the relevant tax lines for each VAT return box can't be prescriptive. Many companies will simply be able to select the number of various tax code results, whereas some others may need to select options based on transaction types, ledgers and so on.
If you have VAT entries that originate from a journal and don't have a tax line, then you may need to consider using a VAT only entry to update the tax line on the new system, with no GL effect.
If you're unsure on any of this, or would like any additional advice on how to configure, amend or structure your tax tables, we're here to help. Contact us today and let our team of dedicated experts help to make your digital taxation processes smoother and more effective in the long term.
How can In2grate support you?
For now, we suggest using bridging software as a short term measure to assist with your digital tax returns and then implement the Infor Local.ly Services solution as soon as it becomes available. Here at In2grate, we are currently working on building a solution that utilises the Infor approved Local.ly tax connector. And this should be available to all of our customers by the end of April 2019.
The advantage of this is that it will allow some earlier testing of the upload processes, and address any issues in selecting tax lines for each of the VAT return boxes.
And, because businesses will have until August 2019 to submit the first quarter’s tax return this gives you ample time to onboard the solution and allow us to help make your transition to a digitally led tax administration easier and more efficient.
The MTD initiative has been designed to make tax returns and the entire process easier and more efficient. But, with any new platform we appreciate that things aren’t always a seamless as they appear. Our team at In2grate are here to help and are on hand to provide the advice and support you need on how to start the transition or how to configure your tax tables.
Should you wish to find out more about the solutions available to you and how we can help you, or to determine if your current system and ERP system is compliant, get in touch.
You can be sure that we will be on hand to guide and help you every step of the way and help make your MTD journey and period of transition easy and efficient.
You can also register your interest in our upcoming webinar that will explore MTD and what it means for you further and will also explain how both In2grate and Infor can help support you and bring you a solution that allows for a seamless integration with your existing ERP system and transition over to this new approach to tax.