Making Tax Digital for single entities

April 2020 is the final deadline to ensure all of your processes are fully digital.

Making Tax Digital (MTD) is a transformational approach to taxation in the UK from HMRC. The first change came in 2019 and affected every organisation from their processes to how their systems were set up to record and report tax.

As a Dynamics user, a question you may ask is ‘is my version of Dynamics going to be compliant?’ In this article we summarise which versions will be compliant and what you need to do to make older version of Dynamics compliant.

Which versions of Microsoft Dynamics will be Making Tax Digital (single entities) compliant?

  • Dynamics 365 for Finance and Operations
  • Dynamics AX 2012 R3

Any Dynamics product, that is still under mainstream support, will have had an update from Microsoft to ensure full compliance.

Receiving the update is not enough to guarantee compliance – there will be a number of small updates such as capturing the right fields and reporting format that will need to be confirmed. By April 2020 you will need to ensure all of your processes are fully digital.

What about older Dynamics products?

For any product not named above you will have to complete a number of actions to ensure compliance. There are two principles that organisations need to comply with.

For the first point – digital record keeping -organisations will be complaint as digital VAT records are being kept so that’s a positive. Again, ensuring they are capturing all the right fields in these reports is crucial.

For the second point, reporting on VAT, a Microsoft update will not be received as the product is no longer supported. A solution for digitally submitting your VAT information will therefore be required. There are two possible ways of dealing with this:

  1. Bridging solution – HMRC is making an API available whereby a custom application can be built to work with your Dynamics solution, allowing you to set up a workflow that submits your information directly to HMRC.
  2. Upgrade – there is a clear upgrade path available to one of the compliant solutions for each legacy Dynamics users. For older versions, this will require more work as there are more changes to take into account, but it may be your best solution. This will mean that you will automatically receive any updates from Microsoft to ensure your system remains compliant.