Further to our last NHS Technical Update we have held several seminars around Making Tax Digital (MTD) and we’ve addressed some concerns and questions raised by the 120 NHS customers who have attended these webinars, particularly around timing and technology.
All VAT registered organisations will be mandated to comply with MTD from 1 April 2019, but only in respect of their VAT obligations.
The implications of MTD are focussed around ‘good digital tax housekeeping’. It will be important to have record keeping software which captures all transactions – many businesses already use finance software which enables them to be as near to real time as possible.
What does this mean for the NHS? It’s important for NHS organisations’ teams to make sure they are preparing ahead of next April to avoid any tax penalties – MTD is not going to go away, it is now legislation under the VAT (Amendment) Regulations 2018. Don’t forget also that March 2019 will be the last return submitted under the current method via the HMRC portal. With the additional impact of Brexit at the end of March 2019, many public-sector organisations will want to be MTD ready well in advance.
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Essentially, NHS finance teams can be assured that VAT returns will be submitted with the same monthly frequency and will still contain the standard nine box format.
However, the biggest change is that VAT returns will no longer be submitted through the HMRC portal and API (application programming interface) enabled products will be essential to submit the return – all related software must be digitally linked and finally, all financial information needs to be stored digitally. HMRC have allowed what they describe as a soft-landing period in respect of the requirement to digitally link all accounting software to the API enabled software. This requirement will not become compulsory until 1 April 2020.
The benefits for NHS finance teams are that there’s only a need to provide information to HMRC once and that there will be complete transparency of information held by HMRC. This will give finance teams a clear view of real time situation on-line and reduce delays when releasing amounts due to organisations and there will be clearer benefits in off-setting one tax against another in the long-term.
Common NHS client concerns have been around getting ‘API ready’ for MTD. If NHS teams are using larger financial service systems and if it’s up to date then they will be able to support this with an API but it’s crucial that they apply the right API patch. Working with your IT support you can also get MTD ready by:
- Reviewing current systems to map the VAT audit trail and identify areas where linkage will be required.
- Considering participation in HMRC’s trial or review any demo version of the software that HMRC makes available on its website.
As it is likely that HMRC will, over time, increase the depth of accounting information that it requires to be provided electronically, businesses should consider a deeper review of the quality of information available in their systems to future proof them as far as possible.
Other potential issue could be around how VAT 21 details will be reported. HMRC are still reviewing this and we will advise further when we have more news.
Our tax team has been working with several NHS customers and their technology support to pilot API enabled software and digital tools to ensure that they have as smooth an MTD transition as possible. If you are a Liaison VAT customer, then we can provide a quote for the development of an API that matches your financial services software to get your organisation MTD compliant.