From XU Magazine, 
Issue 18

Choice is not a luxury for Making Tax Digital for VAT

Welcome to transitioning to a world with Making Tax Digital (MTD). HMRC aims to be the most digitally-advanced, effective and efficient tax administration in the world. You will need to begin embracing digitalisation as you transition through the first phase of the initiative – Making Tax Digital for VAT (MTDfV). You should know by now when your first submissions as a practice under MTDfV apply and just how you will file these VAT returns in a compliant manner…

The real transition to MTDfV filing does not begin and end with the 1st of April deadline. The true impact of the change will be felt at the first VAT return submission. What should be top of mind for you is keeping digital records, reviewing your VAT clients and assessing your current processes to ensure they are fully compliant.

The fundamental change to contend with when you make your first submissions is that you will no longer be able to simply type in the VAT filing numbers into HMRC’s online filing service. Research shows that most accountants have been using HMRC’s online services to file. This service will no longer be available to support filing for businesses with a turnover above the VAT threshold of £85,000. Furthermore, the key requirements from HMRC are that the underlying VAT data is digitally captured, and that software is used that can connect to HMRC through what is known as an Application Programming Interface (API).

So where do I start?

Firstly, consider how you submit VAT returns today. Are you submitting on behalf of your client using a bookkeeping product, or using a spreadsheet to come to the nine figures only to manually type them into the interface? Do your clients prefer to submit their own VAT returns using a bookkeeping product or the online service? You might use a hybrid approach where you export figures from a bookkeeping product to a spreadsheet prior to submission to consolidate trades, adjustments and additional calculations, and prepare the final figures that make up the VAT return. The final question should be, are these processes compliant and if so, do you want to maintain them?

The next fundamental step should be to start maintaining digital records to ensure the first VAT return submission is compliant. The good news is that spreadsheets remain acceptable for digitally capturing data. For some, this might be the logical first step to digitalisation. Providing you use API-enabled or bridging software to make the final submission, you have the freedom to keep spreadsheets with valuable historic data and calculations in the process.

Finally, in preparation for the first submission, whether you submit monthly or quarterly, you should be completing your final reviews on all your VAT clients to establish:

  • Do they want to complete and file the VAT return themselves?
  • Do they want your practice to prepare and file on their behalf?
  • Do they want your practice to validate and file the return after they prepare the data?

Once you have agreed on how to proceed for each of your clients, the next step is reviewing the system you use today and even setting up a new system for monitoring your deadlines. This will ensure that you know when all the different activities are due and are alerted to filing deadlines ahead of time.

Research shows that most practices today are using spreadsheets to monitor returns, which tend to list out the key milestones and deadlines. This is a manual process that relies on the practice continually checking what they need to do next and manually entering the completion dates into the spreadsheet. One solution that practices are looking at is being able to set up an automated workflow within their tax and accounting software which incorporates the alert data, the activities and when they need to be completed.

The key question to ask yourself throughout this review process is: is the process you have efficient enough and compliant?

An opportunity for conversation

MTDfV has been a catalyst to embrace digitalisation. There has never been a stronger push to change business models and search for revenue growth in the shift
to digitalisation. It will continue to motivate you to look at your processes with a sharper scope and find new services.

If you have made the move to the right combination of tools to support your transition, why not use MTDfV to assess your current relationship with clients? It is an opportunity to change how the cases are monitored and who files them.

Your practice now has the option to take on extra services for your client, provided you have the right software to support how you monitor the services. MTDfV is a great opportunity to start having those conversations with your client. Validating and filing VAT returns for your clients who have been reliant on HMRC’s online interface is one opportunity for new revenue. It will also build stronger relationships, giving them the choice to work with your practice on their submission, rather than spending money on the software required.

That said, some clients and advisors might not select this route as they transition. Practices might not have the capacity to take on the VAT submissions for clients and clients may prefer to prepare and submit VAT returns themselves. However, does this leave clients to buy the necessary software or are practices left with no option but to take on the extra work they can’t afford?

Choice is not a luxury but a necessity

With fundamental shifts in processes and myths around MTD flooding the market, you might be left in a corner, ready to abandon all processes. But the truth behind MTD is that there is still the option to choose how you submit, in a compliant manner.

At the heart Wolters Kluwer’s ongoing development and support for our customers as they transition, has given practices the choice to maintain as many of processes as possible, and at the same time introduce new tools which provide additional choices. We have worked with customers to understand how VAT returns were submitted prior to the introduction of MTD to build a solution that does this and more.

Two significant pieces of feedback came out of our research relating to the use of spreadsheets:

  • Practices want and need to continue to use spreadsheets for a significant number of their VAT returns.
  • Where clients were already submitting their own VAT tax return, practices want to continue to support their clients in this, especially if they are using spreadsheets.

CCH OneClick includes an end-to-end MTD toolset that helps you embrace digitalisation. It was built to give you the choice to continue using your spreadsheets and bookkeeping products. CCH OneClick will link digitally with your VAT spreadsheets, which is important as HMRC will not allow you to type data from another solution into the API software – it must be automatically populated from data elsewhere.

Bridging software, like CCH OneClick, is the answer to the question: “can I keep my spreadsheet?”. CCH OneClick is API-enabled, allowing you to continue using your spreadsheets to automatically file data from the spreadsheet.

Where clients are concerned, CCH OneClick allows you to connect, communicate and collaborate with them through advisor and client workspaces. The client workspace has now been enhanced to allow clients to submit their VAT returns through CCH OneClick, using the same solution that you are using for spreadsheets. This not only allows your client to continue to use a spreadsheet, but also gives you the freedom to provide a service to clients without taking on the filing which historically the client has done.

Driving efficient processes

Monitoring your VAT returns efficiently is also at the heart of our toolset. CCH OneClick can provide several ways to monitor the filing of your VAT cases, whether you are looking for a full task management monitoring system using a CCH Central workflow (with VAT template included), or a proactive live dashboard within CCH OneClick to see your VAT cases at a glance.

Furthermore, there are workflow tools available to monitor the individual milestones associated with the VAT return process, ensuring that employees in the practice are alerted to tasks and deadlines.

Future-proofing your practice for the next phase

While there is still uncertainty about when the next phase of MTD, MTD for Income Tax, will go live, it is moving forward regardless. You might be looking only to invest in a VAT solution for now but consider investing in a combination of tools or toolset that will future-proof your processes for the changes to come and help you be prepared ahead of time.

Your practice will need to be thinking ahead so that you are already working with these processes with your clients when the change rolls around rather than implementing another disruptive change in the business at a critical time. CCH OneClick delivers an MTD toolset that incorporates MTD for Income Tax functionality and the Digital Tax Account. With the Digital Tax Account, CCH OneClick can send data held by HMRC directly to your tax return once reviewed.

Furthermore, CCH OneClick provides additional features for practices, allowing you to permanently link with online bookkeeping systems like Xero, using the transactional data to automatically populate the Final Accounts in Wolters Kluwer’s CCH Central suite. This is known as Open Integration. Not only can you easily import client data from products like Xero and many more, but also synchronise data back into the bookkeeping tools when adjustments are required. Bringing all the information into a single location saves time and reduces errors.

2019 has brought serious uncertainty and change. Brexit has been dominating the agenda and has recently impacted on the delivery of MTD for Income Tax. What is certain is that the industry is in a state of change and you should be looking to future-proof your processes regardless of when the next phase of MTD comes about. MTD will continue to present endless opportunities if you allow it.

Why leave it there?

For more information about CCH OneClick or MTD visit our website or email CCHOneClick@wolterskluwer.co.uk

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