Making Tax Digital is Coming - Is Your SAP System Ready?
For millions of businesses across the UK, the end of paper tax records and returns is on the horizon with a mandatory move to digital VAT returns coming in April 2019. For some, organisation of digital records and subsequent VAT reporting may have felt like an ever put-off New (financial) Year's resolution - but soon businesses will be required to keep their records and submit their returns to HMRC digitally by law.
Do you know how the Making Tax Digital (MTD) legislation will affect your business?
And how can you make the best use of SAP tools to ensure your tax processes are efficient and compliant? In this blog, I will cover what the new legislation will mean for you and outline the SAP best practice to get you ready for the tax transformation.
Tax Transformed - A Run-Down on the Legislation
From the 1st of April 2019, the vast majority of VAT registered businesses with a taxable turnover above the threshold of £85,000 per year will be required to keep all tax records digitally and submit their VAT return to HMRC via a compatible bridging software. This legislation is a step towards the government's ambition to become one of the most digitally advanced economies in the world and aims to transform tax administration to become:
So, Making Tax Digital is the first step forward into what will no doubt be an ever-evolving digital economy - but how do your record keeping and submission processes stand up? And as an SAP owner, what is the best way to utilise your software to ensure compliance with the new legislation?
Equipped for VAT Submissions - Using SAP ACR to Streamline the Making Tax Digital Process
The Making Tax Digital legislation will be encouraging many finance departments to take a step back and assess their record keeping and VAT return processes. Whether your data is kept in SAP itself or in other ancillary systems and spreadsheets, one area that is key to ensuring MTD compliance is having reporting which is set up to provide the necessary VAT information to HMRC. SAP have recently launched a new product through the SAP Localisation Hub to help their customers with their MTD reporting and to provide a user-friendly digital link to HMRC - so step forward the SAP Advanced Compliance Reporting Service (SAP ACR Service).
The SAP ACR Service enables you to generate and submit statutory reports that contain indirect taxes (such as value-added tax) to HMRC. It has pre-configured templates for MTD already packaged as part of the solution, giving peace of mind that the information you provide is relevant and correct. It is an independent product built on the SAP Cloud Platform and the solution uses SAP Fiori App technology to provide a much-needed user-friendly experience for completing VAT tasks and returns.
How Does SAP ACR Work for Me?
For those on SAP ERP 6.0 Enhancement Pack 6 and above, the link operates via a two-way interface which records what items have already been submitted to avoid duplication. Enhancement Pack 5 and below operates via a 1-way link so care should be taken not to submit the information twice.
In both instances, the product handles the setup of logging into the HMRC site under the company’s account in a Fiori app that sends you to the government site, providing a streamlined digital link between reporting and submitting the data.
What Else Do I Need to Consider and What Are My Next Steps?
There are a couple of technical elements to consider before installing the solution, as mentioned above with the SDI agent installation and scheduling any data synchronising jobs. Functionally, ensuring your current VAT data is correct prior to using the cloud tool is highly beneficial as is a good understanding of the software and Fiori apps in order to turn the transactional data into a compliant report.
Absoft can assist customers to understand the software and can help with checking your current data to ensure that everything is captured prior to creating reports. We can also help with the technical pre-requisites to make sure you have everything you need in place to use the cloud solution.
It is worth bearing in mind that there is a licence cost associated with the solution for the use of the SAP Cloud Platform and Fiori apps. To get accurate pricing for your current set up, we would recommend getting in touch with your SAP VAR provider or SAP Account Manager.
Any Other Options?
There are a number of sites offering API enabled Excel tools which can also bridge the gap for submitting VAT data digitally to HMRC – keep an eye out for a future blog coming soon which will cover these options.