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Product Updates 418, 417, and 416: Making Tax Digital (MTD) supported for VAT return submission (UK legislation)

From April 1, 2019 onwards, the Making Tax Digital (MTD) initiative has been made mandatory. With this, all VAT-registered businesses with a taxable turnover above the VAT threshold are now required to store their VAT records digitally and to submit their VAT returns via the new MTD API. Via this enhancement, Exact Globe Next will now support the new VAT return submissions API via the MTD service directly to HM Revenue & Customs (HMRC).

This new service can only be used for the submission of VAT returns for the first VAT period starting 1 April 2019 and onwards.

Before the functionality can be used for the first time, ensure the following:

  • you have signed up to the MTD service via the HMRC website, see https://www.gov.uk/guidance/making-tax-digital-for-vat,
  • you know your user ID and password to the Government Gateway (GGW), 
  • the authorization credentials setting has been defined, and 
  • the directory must be defined at the Export Directory field in the Company data settings screen.

Technical requirements

The following are the technical requirements that must be set up before the service can be successfully used:

  • JAVA_HOME environment has been installed. For more information, see How-to: Setting up JAVA_HOME environment,
  • you have access to the Internet,
  • the TLS1.2 protocol has been enabled,
  • the base URL for production APIs is: https://api.service.hmrc.gov.uk,
  • the recommended redirect URI for installed applications is: http://localhost, and using the port 3017, and
  • you have the rights to create files in the directory that has been defined at the Export Directory field in the Company data settings screen.

To support the service, the following enhancements have been made:

Company data settings

The following enhancements have been made to the Company data settings screen (accessible via System ? General ? Settings ? Company data settings):

New field introduced

The Authorise credentials (MTD) field has been added under the VAT / ECSL Online declaration section. The other fields under this section will now be used only for the EC Sales List XML functionality.


Once the authorization credentials setting has been completed, the token will be valid for 18 months, or until your credentials have been changed. By clicking the  icon at the field, the login screen to HMRC will be displayed as the following:


Note that the status of the token which will be used to access the MTD service will also be displayed at the field. The  icon will be displayed if the token exists, and the  icon will be displayed if the token does not exist.

Note: Once the token has been obtained, the  icon will remain even if the token has expired. If your token has expired, a warning message will be displayed when you try to send the VAT returns to HMRC. You will then need to authorize your credentials again.

Assigning VAT return periods

When assigning the VAT return periods via the Invoice list screen (accessible via Finance ? VAT/Statistics ? Invoice list) or VAT overview screen (accessible via Finance ? VAT/Statistics ? VAT Overview), you will be able to define the year, type, and period at the newly added fields in the Assign screen.

Upon clicking the Assign button in either screen, the Assign screen will be displayed as follows:


The newly added fields are as follows:

  • Year: This field allows you to select the financial year in which the VAT return period will be assigned. By default, the financial year that has been defined at General settings will be displayed.
  • Type: This field allows you to select the frequency type of the VAT return period. The options that are available for selection are Months, Quarterly, Financial year quarterly, and Year. By default, Months will be displayed.
  • Period: This field allows you to select the period for the VAT return period. The options available at this field will be dependent on the option that has been selected at Type.

Naming convention for VAT return period

In order for the correct data to be compiled for the new MTD API, the correct naming convention must be used when assigning the transactions to the VAT return periods. The naming convention is both applicable to the manual or automatic assignment. 

For the automatic assignment, the system will automatically assign the correct naming convention. For manual assignment, it should be noted that you must use the correct naming convention when assigning the transactions to the VAT return period. Otherwise, the data will not be submitted to HRMC although you can proceed to complete the final VAT returns which will be submitted for other countries.

Note that you cannot reuse the same naming convention for different tax creditors. 

The naming convention can be referred to in the following section:

Validation on the naming convention of new final VAT returns

The system will now validate the naming convention of the VAT return periods upon the creation of final VAT returns. The validation will be based on the following periods and naming convention:

Period

Naming convention

Monthly

YYYY-XX.

 

Example: 2019-01 for January 2019.

Quarterly

YYYY-ZZ.

 

Example: 2019-21 for the first quarter of year 2019.

Refer to the following table for the return period selection for year 2019:

VAT Return - Return period selection

Frequency

Period

Expected Return period

VAT Quarter Period Dates

Months

January

2019-01

 

February

2019-02

March

2019-03

April

2019-04

May

2019-05

June

2019-06

July

2019-07

August

2019-08

September

2019-09

October

2019-10

November

2019-11

December

2019-12

Quarterly

1st quarter

2019-21

01/01/19 – 31/03/19

2nd quarter

2019-24

01/04/19 – 30/06/19

3rd quarter

2019-27

01/07/19 – 30/09/19

4th quarter

2019-30

01/10/19 – 31/12/19

Financial year: Quarterly

February

2019-22

01/02/19 – 30/04/19

March

2019-23

01/03/19 – 31/05/19

May

2019-25

01/05/19 – 31/07/19

June

2019-26

01/06/19 – 31/08/19

August

2019-28

01/08/19 – 31/10/19

September

2019-29

01/09/19 – 30/11/19

November

2019-31

01/11/19 – 31/01/20

December

2019-32

01/12/19 – 28/02/20

Year

Full year

2019-40

 

Note that the following error message will be displayed after the manual assignment of a VAT period, if the naming convention of the return period does not follow the defined format:

“This system is unable to submit a VAT return with the VAT period reference that you are using. Please make sure that the correct VAT period naming convention is used and assigned accordingly. Do you want to continue?”

You will then have the option to proceed with creating the final VAT returns by clicking Yes, or to cancel by clicking No. If you have clicked Yes, the file will be created with the defined naming convention, and if you have clicked No, you will be able to manually assign the transactions with the correct naming convention to the VAT return period.

If you have opted to proceed with creating the final VAT returns, note that the XML file will no longer be stored in your local machine as the XML file will be converted to the JSON format.

If you are using the Automatic assign option for the VAT returns with the non-standard VAT quarter period, ensure that you select the Financial Year: Quarterly option and the month in which the quarter period for the VAT return starts.

Value added tax overview screen

When sending the VAT returns (accessible via Finance ? VAT / Statistics ? Value added tax, selecting a return period, and then clicking Send), only the final return type for the VAT returns will be supported henceforth.

Submission of VAT returns

Upon the successful submission of the VAT returns via the screen, the HTTP Text column will be updated accordingly and the status will be reflected in the Activities overview screen (accessible via CRM ? Entries ? Activities).

During the submission of the VAT returns, the system will validate the reference of the VAT return periods according to the defined naming convention. If the reference of the VAT return periods does not follow the defined naming convention, the HTTP Text and Information columns will be updated with the error status.


If the submission is successful, then the status will be indicated in the Sent column as displayed:


If the CRM module is available in your license, then the status of the submission of the VAT returns will also be reflected in the Activities overview screen as follows:


Note: The VAT returns can only be sent when the Authorise credentials (MTD) field has been defined. Otherwise, the following error message will be displayed:


Check status button

The newly added Check status button allows you to check the status of a return period. The checking can be done by selecting a VAT return period that has been sent, and then clicking the Check status button.


The status of the return period will then be reflected in the Fulfilled column. The green tick will be displayed in the column if the return period has been fulfilled.

Note: The status can only be checked when the Authorise credentials (MTD) field has been defined.

Fraud prevention header

To ensure that all information of the transactions is secured and protected, the submission of the header information to the HMRC APIs has been made mandatory. To this effect, the secondary legislation has been laid in parliament, which was effective on March 19, 2019. For more information, see http://www.legislation.gov.uk/uksi/2019/360/made.

The following disclaimer has also been made available by HRMC:

“Transaction Monitoring (TxM) is a key security approach adopted in the UK and globally. Our approach is in line with National Cyber Security Centre (NCSC) and Cabinet Office recommended guidance and industry good practice. We monitor transactions to protect taxpayers from infringement of their data by criminals or fraudsters. Without the protection offered by TxM, personal data could be compromised, leading to fraud against taxpayers or the UK Exchequer.  You must help us protect our users’ confidential data by sending us particular types of user audit data which we will record. Our APIs provide HTTP headers that you can use to pass this audit data to us. These headers can influence the processing of the API call, or support our prosecutions for tax or duty fraud.”

For more information, see https://developer.service.hmrc.gov.uk/api-documentation/docs/fraud-prevention.

For the Exact Software privacy statement, see https://www.exact.com/terms-and-conditions.

 

     
 Main Category: Support Product Know How  Document Type: Release notes detail
 Category: Release Notes  Security  level: All - 0
 Sub category: Details  Document ID: 28.932.004
 Assortment: Exact Globe  Date: 10-06-2019
 Release:  Attachment:
 Disclaimer