Tax Managers are not to be envied. Year after year they are faced with the umpteenth new regulation or other significant change. In order not to start panicking in view of the imminent decision on Brexit, the header above may be regarded as an attempt to downplay their concerns a little. A bit like the epic ‘Black Knight’ sketch by Monty Python in which chopped-off body parts are considered as mere ‘scratches’ or ‘flesh-wounds’. It is actually more than that.
EU or non-EU goods
Brexit, either deal or no-deal, is simply not in our hands. And at present not in anyone’s hands for that matter. Preparing for a hard Brexit implies that companies within the EU will have to treat goods and services from the UK as non-EU goods and the other way around. You may have to verify your set-up and internal process in the E-Business Suite to make sure you apply the VAT at the right moment.
In case you are already importing goods and services from outside the EU the applicable processes are already in place. In all other cases, just remember that advice is just a phone call away.
Making Tax Digital
According to the Making Tax Digital for VAT programme (in short MTDfV), VAT registered businesses (except very small ones) will need to keep VAT records digitally (which is already the case for EBS users) and file their VAT returns using Making Tax Digital compatible software. In this way, transactions can be traced from source data (i.e. purchase/sales ledger) through to VAT return completion and upload to HMRC. For Oracle users this implies that a digital link needs to be established between the source system (EBS) and the reporting software. Also, VAT declaration figures must be reported via API transfer. This will start from their first VAT period starting on or after 1 April 2019. As of that date, submitting your VAT declaration details manually on the HRMC website is no longer permitted.
Basically, companies have two options when preparing for Making Tax Digital:
- The Glue and Mend approach. There are dozens of free or low-priced software packages and 3rd party agents who help you get the required VAT data at HMRC. But does this approach really ease the burden of performing manual tasks? Isn’t it just one digital step instead in a comprehensive process of digitalization? A way of semi automation if you like?
- The Real Digital solution. Real Digital means automating the complete process from VAT determination all the way down to submitting the data to HMRC. No manual interference is required. MTDfV and other more advanced digital requirements such as E-invoicing and SAF-T force organisations to submit VAT data digitally.
Real Digital solution
We strongly recommend implementing the Real Digital solution to prepare your organisation for future developments. Why not kill two birds with one stone by simultaneously implementing our itax4apps solution and Making Tax Digital for VAT to automate your VAT reconciliation process as explained in our previous post?
MTDfV is an excellent opportunity to allocate budget to establishing the Real Digital solution, which is already available in the form of a plug & play solution for all your VAT processes.
For those of you who still have to draw up a plan, we advise you to take action soon. The closer the deadline, the more scarce resources tend to be. If you have implemented adjustments for Italy or Spain recently, this first step of Making Tax Digital may look less complicated (and it is) but there is still work to do in setting up and testing the transfer.
You can contact us for advice any time or email Henk Tiesma directly at h.tiesma@4apps.com. And remember: by air, The Netherlands is just around the corner.
