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Making Tax Digital for VAT

Looking at the latest legislation to impact on AP and Finance teams in the UK. Making Tax Digital (MTD) for VAT. Includes a look at Global trends and how technology can help.

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Making Tax Digital for VAT

  1. 1. MAKING TAX DIGITAL FOR VAT (MTD FOR VAT) John Stovold – UK Marketing Manager November 2018 1
  2. 2. 2 • What you need to know. • Why is this an AP issue? • What are the potential impacts for AP? • What can be done in AP in preparation? • Wider VAT trends – Global view. • FAQ’s & Questions. AGENDA
  3. 3. 3 Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software. Making Tax Digital Explained
  4. 4. 4 WHAT YOU NEED TO KNOW…
  5. 5. 5 “Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.” VAT Notice 700/22: Making Tax Digital for VAT Published 13 July 2018 Section 1.2 “Only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital.” MTD for VAT Section 2.1 WHO DOES THIS IMPACT?
  6. 6. 6 “With effect from 1 April 2019, if your taxable turnover is above the VAT registration threshold you must follow the rules set out in this notice.” MTD for VAT Section 2.1 WHEN DO WE NEED TO BE READY?
  7. 7. 7 Yes. Whilst the filing of tax returns may not be something that AP is directly involved in, this legislation has a wider impact. It is concerning the full audit trail of information that your business receives, how this is managed, traced and reported through to payment. Now that is an AP problem! IS THIS REALLY AN ACCOUNTS PAYABLE PROBLEM?
  8. 8. 8 WHY IS THIS AN ACCOUNTS PAYABLE ISSUE?
  9. 9. 9 How do you currently move data from received invoices to your finance system? • Manual input of data from supplier invoices • Automated capture and processing of data • Other QUESTION?
  10. 10. 10 • Example 1 – A business receives an invoice and types selected data contained in the invoice into functional compatible software. They must still keep the invoice in its original form as the data in the functional compatible software is not a copy of the invoice. SECTION 3 DIGITAL RECORD- KEEPING
  11. 11. 11 • Example 2 – A business has functional compatible software that scans the invoices received and puts the information in its ledger. If the image is retained and contains all the detail required for VAT purposes then the business does not need to keep the original invoice unless it is required for another purpose. SECTION 3 DIGITAL RECORD- KEEPING
  12. 12. 12 WHAT ARE THE POTENTIAL IMPACTS FOR AP?
  13. 13. 13 • Likely to no longer be sufficient, as of 01.04.19, for any business that is VAT registered and meets the criteria of this legislation. • All invoices must be retained in the format in which they are processed. – Manually processed – physical copy must be stored. – Electronically processed – physical copy no longer required. SCAN TO ARCHIVE
  14. 14. 14 “Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.” “It follows that transferring data manually within or between different parts of a set of software programs, products or applications that make up functional compatible software is not acceptable under Making Tax Digital.” OUTSOURCED INVOICE PROCESSING
  15. 15. 15 Do you use a scan to archive tool, or have you outsourced your AP processes? • We have a scan to archive solution used after a manual process. • We have an archive solution as part of an automated process. • We have outsourced our AP processing. QUESTION?
  16. 16. 16 • emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation (for instance, a Partial Exemption calculation) • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to an agent to import that data into their software • XML, CSV import and export, and download and upload of files • automated data transfer • API transfer WHAT ARE DIGITAL LINKS?
  17. 17. 17 • Applies to all VAT returns (AP & AR) • Current processes will no longer be accepted – online portal, or manual submission. • ERP’s or API’s must be used to make the submissions • Not all ERP’s are listed as certified, nor may they be. SUBMITING YOUR VAT RETURNS
  18. 18. 18 WHAT CAN BE DONE IN AP IN PREPERATION?
  19. 19. 19 • Space? – Desks – Storage – Archive • Staffing? – Increased headcount • Time? – DTR compliance? • Visibility? – For you & your suppliers? COST OF REVERTING TO MANUAL PROCESSING
  20. 20. 20 • Speed of receipt of invoice. • Visibility of processing. • Speed of authorisation / sign off. • Understanding of data. • Clarity for internal & external partners. • Faster payment terms. • Complete audit trail. • Compliance with legislation. • Drastically reduced costs. DIGITAL VS PHYSICAL INVOICE MANAGEMENT
  21. 21. 21 • Cloud technologies increase speed of project go live. – From a historic timeframe of 3 to 6 months, to just a matter of days. • as-a-Service models allow for greater payment flexibility, potentially reducing budget impacts. – If budget hasn’t been explicitly assigned for an automation solution, could OP-EX be the answer? CAN NEW SOLUTIONS HELP?
  22. 22. 22 WIDER VAT TRENDS – GLOBAL VIEW
  23. 23. 23 • Global desire to close “the VAT gap”. • Move to mandatory digital submissions ongoing. – Real-time mandatory controls likely in 10 to 15 years, globally. • European countries starting to move from Post Audit VAT processes to Clearance processes. – Portugal & Italy are early adopters. VAT TRENDS
  24. 24. GLOBAL PROJECTION 24 • Blue – Post Audit (Audit Years After e.g. EU) • Yellow – Clearance (Real Time Controls e.g. LATAM) * Trustweaver Report 2017
  25. 25. 25 1. What is the “Soft Landing” period as mentioned in the legislation? 2. Can HMRC’s portal still be used after MTD for Vat? 3. When will this legislation have an impact on our business? 4. Are there any exemptions from this policy? FAQ’s
  26. 26. 26 QUESTIONS?
  27. 27. 27 The Full Government Notice: https://www.gov.uk/government/publications/vat-notice- 70022-making-tax-digital-for-vat/vat-notice-70022- making-tax-digital-for-vat Summary From Sage: https://www.sage.com/en-gb/blog/making-tax-digital- for-vat/ Mandatory e-invoicing In Italy (Trustweaver): https://www.trustweaver.com/italy-introduction- mandatory-einvoicing/ Free Compliant Software: https://www.accountancydaily.co/avalara-launches-free- excel-add-making-tax-digital-vat Compatible Software Solutions: https://www.gov.uk/guidance/software-for-sending- income-tax-updates USEFUL LINKS
  28. 28. 28 THANK YOU
  29. 29. KEEP IN TOUCH WITH ALL THE LATEST NEWS FROM ITESOFT 29

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