Microsoft Dynamics AX and Making Tax Digital

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

As a Microsoft Dynamics AX Partner we are helping several our customers work through how best to approach Making Tax Digital.

Which versions of Dynamics AX will be Making Tax Digital compliant?

Any Dynamics product that is still under mainstream support will get an update from Microsoft to ensure full compliance. This means for Dynamics AX only Dynamics AX 2012 R3 will be automatically updated.

Microsoft have not confirmed when this update will take place as there are still some further details to come from HMRC however we anticipate clarity by the end of 2018.

Receiving the update is however 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. In addition, by April 2020 you will need to ensure all of your processes are fully digital.

What about older Dynamics products?

For those using other Dynamics AX products, including Dynamics AX 2012 RTM, Dynamics AX 2012 R2 and Dynamics AX 2009, you will not receive an update so will need to take action to become compliant.

There are two key principles to Making Tax Digital (see our Making Tax Digital hub for more information). Firstly – digital record keeping – you will be compliant as digital VAT records are being kept in Dynamics AX so that’s a positive. Ensuring you 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:

Bridging Solution – HMRC is making an API available whereby a custom application can be built to work with your Dynamics solution and allow you to set up a workflow that submits your information directly to HMRC.
Upgrade – there is a clear upgrade path available to Dynamics AX 2012 R3. For older versions this will require more work as there are more changes to take into account, but this may be the best solution. This will mean that you will automatically receive any updates from Microsoft to ensure your system remains compliant.