The topic links below will help you find answers to frequently asked questions regarding Making Tax Digital for VAT (MTDfV) and managing reporting through Sybiz Vision.
Each topic is divided into categories but you can also use your browser’s find function to locate specific information.
These FAQs are updated regularly so be sure to return whenever a question arises. Alternatively, you can use your favourite search engine to look for answers, just preface your search with: Vision MTD.
About MTD
1. What is Making Tax Digital?
Making Tax Digital or MTD is a phased rollout of initiatives by Her Majesty’s Revenue and Customs (HMRC) to digitise tax accounting. The anticipated outcomes are streamlined tax compliance and easier access to tax information for individuals in the UK. One phase of MTD is to digitise VAT record-keeping and returns.
2. How does MTD for VAT (MTDfV) affect my business operation?
MTD for VAT enforces three key rules for affected businesses:
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Quarterly VAT returns must be reported digitally
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VAT transactions must be recorded and stored digitally
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VAT transaction data can only be transmitted or transformed by a ‘digital link’
3. Who is affected by MTD for VAT?
MTD for VAT is mandatory for all UK VAT-registered businesses with a turnover over the £85,000 registration threshold. VAT-registered businesses under the registration threshold are not required to adhere to MTD regulations at this time.
4. What if I deregister from VAT in future?
MTD for VAT is optional for non-registered businesses and you will no longer need to keep digital records if you deregister, however you must retain VAT records for periods in which you were a VAT-registered business.
Transitioning to MTD reporting
1. When will I have to start recording and reporting VAT digitally?
Essentially, if you are not already, you should be keeping digital records of your VAT transactions. If your business is already using an ERP solution such as Sybiz Vision to record your VAT transactions and financials you are half way to being compliant.
While MTD for VAT came into effect from the April-June 2019 quarter, your VAT reporting quarters or frequency will not change, only the method of reporting.
If you typically report for the April – June quarter, you will need to report your first digital VAT return no earlier than July 2019.
If your reporting quarter does not begin in but is inclusive of April, the following quarter will be the first reported via MTD for VAT standards (e.g. if your reporting quarter is March – May, your first digital VAT report will cover the June-August quarter).
2. What does digital record-keeping mean?
Digital record keeping means your VAT transactions must be held in an electronic format that can be viewed on a desktop computer, laptop, tablet or a mobile phone. However, this does not mean that simply keying information in your business management solution is sufficient.
If you have received a printed document, you must enter the data into your accounting system AND keep either the printed copy OR include a digital scan or photograph of the document with all required VAT information clearly visible. There are also a number of records that HMRC requires by law to be preserved in their original form for VAT or other tax purposes.
3. What is a “digital link”?
MTD for VAT will eventually require the use of “digital links” when transferring, transforming or recapturing financial information, when that information will continue to form part of any digital records.
This means that any piece of information has been entered into your ERP or accounting solution must remain in a digital form if you were to use that data in another piece of software. Manually updating or transferring information is not accepted by MTD guidelines.
For example, you have printed an invoice for a customer and later handwrote an additional item to be invoiced, then presented it to the customer. MTD requires that you update the invoice in your own system or create an additional invoice for that item from your ERP solution.
This also applies if you are transferring or transforming information across 2 or more software solutions. A digital link, such as an API, must be created between systems to ensure accurate transfer. Using copy and paste commands to move information does not constitute a digital link.
The HMRC website contains a more detailed list of acceptable ‘digital links.’ Further details are contained in The Value Added Tax (Amendment) Regulations 2018 (2018/261).
4. What if my business is not set up for digital links?
HMRC has advised that they will allow a grace period due to the logistics of implementing digital links, as well as the pressure placed on businesses due to the COVID-19 pandemic. Digital links will not be required until a business's first VAT period on or after 1 April 2021. During this grace period, HMRC will allow the use of copy and paste as a digital link.
5. Do I need to speak to my accountant about MTD for VAT?
We recommend you speak to your accountant about your VAT obligations and how MTD for VAT might change your operations. Sybiz has published an Information Pack for external accountants to answer some critical questions about managing MTD for VAT.
MTD reporting with Sybiz
1. How can I meet my MTD for VAT obligations with Sybiz Vision?
Any transactions with VAT that are processed through Sybiz Vision are acceptable for MTD conditions so long as you keep a physical or digital copy of the original documentation.
Sybiz Vision was updated to facilitate digital reporting of VAT returns to HRMC so we recommend upgrading to the latest version as soon as possible to make the process easier.
2. Is Sybiz Vision Classic MTD for VAT compatible?
Sybiz Vision Classic received a temporary solution to facilitate VAT returns to HMRC. Changes to MTDfV requirements mean Sybiz Vision Classic is no longer be compatible from 1 April 2021. If you are using Sybiz Vision Classic, you must upgrade to the latest version of Sybiz Vision to remain MTD compliant.
3. How do I sign up for MTD?
Before you are able to submit MTDfV you will first need to sign up for MTD via the UK Government Gateway. This process is required only once and can be done by following the steps below:
1. Visit https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat.
2. Read through the information provided, then click on the relevant link under 'Sign up'.
3. Follow the sign-up process (Sybiz Vision 18.12 and above submit through MTD for VAT).
4. When prompted, sign in using your Government Gateway User ID. If you do not have a Government Gateway User ID, you will be able to create one at this step.
5. You will receive an email to verify your email address, click on the link in the email to complete the verification process.
6. Read and accept the terms and conditions.
You should receive confirmation from HMRC that you can start submitting MTD for VAT within approximately 24 hours.
4. How do I authorise MTD in Sybiz Vision?
Once you have upgraded to the latest version of Sybiz Vision, 'Making Tax Digital' icon will appear in the ribbon bar under General Ledger > Tax Manager.
The first time you click 'Making Tax Digital' you will be prompted to enter an authorisation code into Sybiz Vision. This code authorises Sybiz Vision to communicate with HMRC on your business's behalf for an 18 month period, at which time you will be prompted to authorise the software again.
To access your authorisation code you will need to login to HMRC Online Services using your Government Gateway credentials when prompted by Sybiz Vision. A code will be provided that you can copy and paste into Sybiz Vision, as below:
Once you have successfully entered your authorisation code, the Making Tax Digital screen will appear.
5. Why do I need to authorise Sybiz Vision with the HRMC?
Authorisation allows Sybiz Vision to send data to the HRMC via the MTD process. You will need to reauthorise every 18 months to allow reporting to continue. You are able to rescind authorisation at any time.
6. How do I submit returns using MTD in Sybiz Vision?
When you are ready to submit your return to the HMRC you will need to close the tax period for that return as you would normally in Sybiz Vision. Once the tax period has been closed, you will be able to select it for submission.
In Sybiz Vision, go to General Ledger > Tax Manager > Making Tax Digital.
You will be presented with a screen that shows the information related to your return. The HMRC information will display the dates of the return they are expecting from you.
Select the tax period that corresponds with your outstanding reporting obligation from the drop-down list, and submit by clicking OK. The most recently closed tax period is shown at the top of the list.
You will be able to view your return by logging into HMRC Online Services approximately 24 hours after you have submitted.
7. How do I submit returns using MTD in Sybiz Vision Classic?
From 1 April 2021, Sybiz Vision Classic is no longer be compatible with the requirements of MTDfV.
Unlike the new Sybiz Vision, you must submit your MTDfV return before closing the tax period in Sybiz Vision Classic.
When you are ready to submit your return to the HMRC, access Making Tax Digital from the Utilities menu in Sybiz Vision Classic. You will be presented with a screen that shows the information related to your return. The HMRC information will display the dates of the return they are expecting from you.
After you have submitted your return you can close the tax period. You will be able to view your return by logging into HMRC Online Services approximately 24 hours after you have submitted.
Information for External Accountants
1. How do I digitally link data for a VAT group where each member has different systems?
HMRC does not provide any specific guidelines on how to manage VAT consolidation within a group, only that it must follow through a digital link. Each VAT group will need to decide on their own best practice for maintaining digital links.
2. Are there HMRC approved or sponsored MTD for VAT solutions?
HMRC have no announced plans to provide their own solution for submitting VAT returns, putting the onus on software vendors to facilitate digital submissions. Each compatible software solution will receive a unique identifier from HMRC. It is important you verify your business management solution has been assigned a unique identifier from HMRC before using it to submit digital VAT returns.
3. Where can I get more information to assist my clients with Sybiz Vision and MTD?
Sybiz has published an Information Pack for external accountants to answer some critical questions about managing MTD for VAT.
Glossary
API – Application Programming Interface - A functional or procedural link between two applications to allow data sharing.
Digital link – A function or process that transfers data within or between software solutions without the need for manual copying or re-keying.
Digital record-keeping – Storing data on a computer or mobile device in a manner consistent with HMRC guidelines.
HMRC – Her Majesty’s Revenue & Customs – the United Kingdom Government’s tax authority.
MTD – Making Tax Digital – A broad initiative from Her Majesty’s Revenue & Customs to make the UK tax system largely digital.
MTD for VAT (MTDfV) – Making Tax Digital for Value-Added Tax – A specific part of the broader MTD initiative that seeks to digitise the VAT reporting and return process.
Sybiz Vision – Sybiz’s flagship ERP solution.
Sybiz Vision Classic – Sybiz’s legacy accounting program. Replaced with our latest ERP solution as of version 13.00.
VAT – Value-Added Tax.