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UK Making Tax Digital (MTD) Frequently asked questions

Written by Marcel Thijssen on . Posted in Exact Synergy

In this blogpost you’ll find some frequently asked questions and answers about Making Tax Digital (MTD) for the UK.

Which Release Do I Need to Use?

Exact Globe customers with the English legislation must ultimately update to product update 417SP9 or 416SP17 before they need to do their first VAT Return for the VAT period starting on or after 1 April 2019.

Will these changes be made available in older releases?

These changes will not be made available in the older product updates or service packs.

Are there any Technical Requirements?

The following are the technical requirements that must be set up before the service can be successfully used:

  • JAVA_HOME environment has been installed.
  • You have access to the Internet,
  • The TLS1.2 protocol has been enabled,
  • The base URL for production APIs is: https://api.service.hmrc.gov.uk,
  • The recommended redirect URI for installed applications is: http://localhost, and using the port 3017
  • You have the rights to create files in the directory that has been defined at the Export Directory field in the Company data settings screen.

What Set-up is required?

Before the functionality can be used for the first time, ensure the following:

  • You have signed up to the MTD service via the HMRC website,
  • You know your user ID and password to the Government Gateway,
  • The authorization credentials setting has been defined,
  • The directory must be defined at the Export Directory field in the Company data settings screen

What if I have a Non-GBP Database?

It was previously understood that if you had a non GBP database then this was allowed within the software, however all VAT reporting would then have to be done manually as the standard VAT Overviews in Exact would give the figures in Euro’s but the VAT Return to be sent to the HMRC must be done in GBP. This previously wasn’t an issue as the figures could be calculated in a
report/spreadsheet and then manually entered into the HMRC Online system.

With MTD now being mandatory this manual intervention of figures to the HMRC is no longer allowed as per the HMRC’s rules which are “VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT Returns”

Therefore, all customers with a EURO database will now have 3 options:

  1. Create a new database within Exact Globe with a base currency of GBP and complete all transactions in this database.
  2. Create a new database within Exact Globe with a base currency of GBP and then import into this database a journal with the VAT figures and then use our MTD API, this would mean an import either every month or quarter depending on their VAT Reporting. We would recommend a consultant help them with this import of figures.
  3. Use a bridging software, there are various bridging software suppliers some of which provide free software and some of which they will have to pay to use. We can make NO recommendations on bridging software suppliers.

It should be noted about bridging software –

Under the MTD ruling you are allowed to use more than one product to keep records, however if you use more than one product to keep your digital records, you’ll need to digitally link them  together.

For bridging software, a soft landing period will be introduced (April 2019-April 2020) during which an amount of leniency exists regarding the digital transfer of data, however full digital links between the products must be in place 31 March 2020, unless the HMRC has informed them that they are in the deferral group. If they are in the deferral group, then they have until the 30
September 2020.

What if I need to do a Group VAT?

At the moment we have no possibility to do a Group VAT Return within Exact Globe and although the deadline for MTD in a Group VAT environment is postponed until the VAT period starting on or after 1st October 2019 it does mean that the customers will need to have a workaround in place in case they plan to join earlier.

There is a document that describes the suggested workaround, however to fully meet the MTD requirements then there may be a need to have some consultancy in order to create the XML export file that will need to be created from the Excel spreadsheet, although there will be some leniency until September 2020 in regards to the digital links being in place. If you would like a copy of the document, please contact the support department.

Has the naming convention for assigning VAT Periods changed from previous releases?

Yes, in previous releases the naming convention was period based, even if you were reporting on a quarterly basis, as this was needed for the old XML format.

Why is there now a specific naming convention for the VAT Return Period?

As part of the HMRC’s Making Tax Digital initiative the HMRC has given each VRN (VAT Registration Number) their own unique VAT Period ID.  This unique period ID is ascertained as part of the MTD submission and included within the file.  In order to make sure that the VAT transactions correspond to the same VAT period ID, a naming convention was identified that could be validated by the software prior to the creation of the file.

Please note that if you log into your VAT account within the HMRC website you will not see the VAT Period ID that we use within the software.

This is the same naming convention that we use within other legislations.

Please see release note 28.932.004 for specific details on the naming convention.

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