As of April 1, 2019, the Making Tax Digital is an obligation imposed by Her Majesty Revenue and Customs (HMRC) organization in the UK to provide VAT return information digitally through a functional compatible software. Fortunately, Dynamics 365 Finance is one of them; the software supports this functionality based on Electronic message and provides a flexible approach for setting up and supporting reporting processes.
Throughout this blog, I will briefly present the process and benefits based on successful implementations in the United Kingdom of the Making Tax Digital functionality that Microsoft Dynamics 365 Finance has available.
1. Retrieve VAT obligations
Reporting VAT starts by retrieving the tax information from the system. Daily, we register VAT on purchases and sales of goods or services. At the end of the period (quarterly or monthly), Dynamics 365 Finance allows us to manually execute or schedule an automatic process to calculate the VAT value that must be reported to HMRC in the period. Corrections made in previous periods will be included in this cycle.
This periodic process will make two actions in the system:
- It will generate a VAT report that will allow you to review the tax information in detail showing the VAT calculated in purchases and sales.
- And it will create an automatic account payable to HMRC with the differences resulting from the calculation between the generated VAT and the deductible VAT.
After executing this process, the system will be ready to create and send a VAT obligation request to establish a connection with the HMRC organization and successfully comply with Making Tax Digital.
2. Generate a VAT return
Before transmitting the information to HMRC, the system will generate a preview of the report in Excel format. It is a great advantage; it will allow reviewing the VAT information that is going to be transmitted before sending it in JSON format, making sure the data is consistent so setbacks can be avoided.
The VAT 100 report can be exported in an Excel format several times before generating the file for submission in JSON format.
3. Submit a VAT return for the period
When a VAT return in JSON format is generated, and it is ready to be submitted to HMRC organization, the submission to the Making Tax Digital for the VAT web application starts with the last JSON file attached to the electronic message.
The system will notify you that the information has been successfully sent. This response will contain details of date, time, and status, to be certain of the data transmission and double-check for errors.
To summarize, Dynamics 365 Finance will allow you to generate, review, and transmit in the required format the VAT data obtained during the operation of the period, including the remaining records from previous periods. All this can be done directly from Dynamics 365 Finance by following easy steps without having to enter the HMRC platform. In addition to transmitting information, the system will also allow you to retrieve information about VAT payments and VAT liabilities from HMRC.
Thank you for reading this blog! I hope you have gotten a sense of the Microsoft Dynamics 365 Finance capabilities to support your business VAT process. If you want to know more details about the operation of the Making Tax Digital integration in Dynamics 365 Finance, we invite you to contact us and meet our services.