As businesses continue to take advantage of the power of technology, especially advances in software, existing regulations are being changed in recognition of this. Probably the most high profile example of this at the moment is the forthcoming changes to the way in which companies keep digital records and the submission of VAT returns, also known as Making Tax Digital (MTD).
What does Making Tax Digital mean?
From April 2019, any business with an annual turnover exceeding £85,000 will be required to keep records in digital form and file their VAT Returns using software. Whilst many companies already keep digital records and accounts, the introduction of the Making Tax Digital regulations takes things a step further by requiring these digital records to flow through to HMRC via the HMRC API (Application Programming Interface) in the form of a VAT return.
Whilst we at E-Max are all in favour of streamlining processes to create as many efficiencies as possible (it’s what our ERP software does best after all!), we recognise that these new regulations will create some challenges for manufacturers and other businesses. The good news is we’ve already taken action to help our customers, both present and future, easily manage these changes.
How can E-Max ERP help in Making Tax Digital?
We’ve added functionality into the financial side of our ERP software to ensure that E-Max ERP conforms to HMRC’s upcoming requirements. Our new financials functionality ensures E-Max’s accounts system not only compiles the total VAT due to be paid or refunded in a particular VAT period but also transfers this data electronically to HMRC.
Our additional functionality includes:
VAT returns can be created with a single click and have full drill down, enabling you to easily check the data being submitted and make any adjustments required. Any adjustments will, of course, be recorded as per the MTD requirements. You can also print out reports and automatically submit the VAT return to HMRC (via their API). Once submitted, E-Max ERP will receive an automated response from HMRC acknowledging the success of your submission.
E-Max ERP is fully HMRC API-enabled so VAT returns can be submitted by our customers directly
This new functionality sits on top of our existing Financials module. The digital recording of every Sales and Purchase transaction has always been included in E-Max ERP, as has the calculation and recording of the VAT components of these transactions.
HMRC have also indicated that both sales and purchase invoices can be stored/recorded as scanned images or original digital copies. E-Max ERP allows the easy attachment of documents and images to all transactions in our system. Safe in the knowledge your originals are stored securely within E-Max, you no longer need to physically store the original paperwork – saving you in terms of cost, space and resource.
With the event of HMRC MTD we have continued to ensure that the functionality in our system meets the requirements of UK manufacturing companies. E-Max ERP is a fully integrated solution that allows you to store all of your financial records and copies of paperwork digitally. E-Max ERP also enables you to submit your VAT returns using the HMRC API. There is no need for additional links, software or user intervention that would simply create additional work and challenges for you.
Benefits of Making Tax Digital:
As far as the HMRC is concerned this is another step in making the whole process more efficient both for them and the company submitting the VAT return.
Benefits to a company include:
• E-Max’s MTD update makes it much easier for company to see each entry in its VAT submission for the period
• The VAT which is typically calculated in often inaccessible spreadsheets is now open to all
• Because one can see each element of VAT due (or to be received) in the period, managers can inspect and check the data more easily and hence can plan better for its eventual payment.
• When the figures have been finalised no need to log onto the HMRC site and enter the VAT – it is done automatically
Whilst benefits to HMRC are:
• The whole process is made more efficient
• A reduction in errors which are estimated to cost around £4billion
What Do We Need to Do?
From April 6 2019, every business whose annual turnover exceeds £85,000 (a few exceptions apply, ie those defined as ‘digitally excluded’: those who cannot engage with software or apps for reasons of religion, disability, age or remoteness of location) needs to have the ability to store their records digitally and the ability to submit their VAT returns via the HMRC’s API. Fortunately, the systems used for each of these tasks don’t need to be directly connected for April. HMRC will allow data to be transferred or cut and pasted from one system to another for upto 12 months of the first VAT return submission after April 6. It sounds a bit messy but the HMRC have advised that they are offering this soft landing option to allow businesses an extended opportunity to connect their systems.
This is where having a system like E-Max ERP which can both store records digitally and calculate and submit your VAT return is a huge advantage. Businesses that choose to implement E-Max ERP can be confident they will be fully compliant with these new regulations within the required date.
Is There More to Come?
One can ask where this is all going to end. Corporation and Income Tax looks to be the next target to become digital, potentially as soon as April 2020. This means most businesses will have to prepare quarterly updates of operating income and expenditure and submit digitally. The good news is this will give the government a quicker and more accurate picture of what’s happening in the economy with the result that it can react more quickly to problems and better target any remedial measures. The bad news is that there’s more challenges ahead for businesses who are already struggling with multiple systems.
The team at E-Max is dedicated to providing a fully compliant ERP system for our customers. Our proactive approach to regulation changes means we will continue to incorporate any requirements for these changes into our ERP software. Speak to one of our ERP consultants to see how E-Max ERP can help future proof your company from further changes.
If you’d like to find out more about E-Max ERP and how it can help your business in other ways, take a look at our website, contact us on 0141 644 4424 or drop us an email. You can also book a free demo with us to see our software in action.
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