UK MTD - SAP add-on for MTD UK (2020)

UK local entities have to submit from April 2019 the nine boxes of the VAT return to HMRC to 1) a different portal and 2) in an automated way. Starting 1 October 2019, this obligation is in force for overseas traders and VAT groups.

The period April 2019 till April 2020 is a soft landing period to allow taxpayers time to have in place digital links between all parts of their functional compatible software. For VAT periods commencing between 1 April 2019 and 31 March 2020 businesses will not be required to have digital links between software programs yet.

HMRC received the VAT return numbers of the nine boxes already electronically before April 1, 2019. The new way of submission during the soft landing period does therefore not provide HMRC with any new insights.

The only difference is that filing should take place in an automated way as manual entry of the consolidated numbers of the 9 VAT return boxes is no longer allowed, and that submission of those numbers should take place via HMRC’s new API platform. At the same, HMRC sends back the response.

Starting April 2020 the digitally linked VAT accounting data will have to be submitted to the tax authorities either periodically or on request. That data will be used to review whether the numbers of the nine VAT returns submitted are correct (tax audit (almost) real-time).

The suspension of penalties on late MTD filings after the soft landing period ends. These are based on the number of offences in the past 12 months and can reach 15% of the VAT due, increased with tax penalties of up to 100% of undeclared VAT.

What do we offer?

Our SAP add-on for MTD UK for VAT solution is without an external interface and can be implemented with no SAP impact in any other areas. Our solution is SAP release independent.

We have developed 2 packages and various modules to satisfy various client needs based on the use of Standard SAP for VAT, and the current VAT return process.

Our 'Premium package' includes all our VAT features and can subsequently be complemented with client specific enhancements. To facilitate flexibility of clients that use standard SAP for the VAT return process, we have launched a standard package that contains all basically required VAT return submission directly from SAP.

The Standard package 

The Standard package is primarily designed for companies that have all VAT information for submitting the VAT return available in SAP.

When the tax codes are the only relevant source data for the VAT reporting, and those tax codes are used for the calculation of the consolidated numbers of the nine boxes of the VAT return only. 

The SAP add-on extracts all the relevant VAT return data from Standard SAP to calculate the nine boxes of the VAT return:

  • The add-on transforms the VAT accounting data into final numbers of the nine boxes of the VAT return in a legally required JSON format.

  • The add-on developed and approved by HMRC generates automatically the JSON file and the Client can submit the VAT return to HMRC, and retrieve liability and payments reports

  • Functionality for effective and efficient management of VAT in SAP is possible via the SAP add-on Cockpit

  • The SAP add-ons supports all HMRC's APIs

The Premium package

The Premium package contains all the features of the Standard Package functionality and has some extra features.

In the cockpit of the SAP add-on manual adjustments or relevant VAT data can be added. The add-on can display these changes made and therefore contains audit trail functionality. In the add-on and standard VAT controls to test whether the source data contains VAT errors.

All information is available in SAP or can be archived on a local server. The client can provide quickly to HMRC when HMRC request that data for tax audit purposes. Starting 1 April 2020, when it becomes mandatory, the client can submit the underlying VAT accounting data as well.

The premium package will maximize workforce efficiency, avoid rework, decrease risk exposures and increase visibility and awareness; enabling the tax function to set the right priorities.

The features listed below ensure submitting of the VAT return and the underlying digital accountancy data and enable effective and efficient VAT management.

  • The underlying digital VAT accountancy data is available in the cockpit and can be sent in a JSON file when the tax authorities request that information

  • Manual corrections in the add-on with audit trail of the VAT result, i.e., easy to follow initial results +/- corrections to final VAT result. The digital accountancy data is archived in SAP and can be stored on a local server

  • Reconciliation of VAT result and GL balance on VAT accounts 

  • Reconciliation VAT results and other reports if applicable, e.g., VIES, Intrastat, etc. 

  • Linkage with clients existing calculation files if applicable or requested 

  • Any enhancement based on client’s requirements is feasible as the add-on can be tailored based on client demands

What is an SAP add-on?

An SAP add-on enhances standard SAP itself.

Add-on components are extra functionalities that do not come with the main SAP product. Different organizations have different requirements. SAP has recognized that and facilitated that additional functionality can be added and that such functionality as a component can be integrated with standard SAP.

An add-on is permitted by SAP – the code 'ABAP' is written and transported where SAP allows it. That means these add-on components sit above the core and access the same dictionary objects or repository objects and perform the required functionality. It contains custom authorization objects according to SAP standards.

SAP add-on solutions are, therefore, without an external interface or external software and can be implemented with minor or no SAP impact in any other area. An SAP add-on does not change the programming code of SAP. As a result, SAP upgrades do not lead to any problems, and maintenance is straightforward.

Additional functionality is added to standard SAP:

'User-friendly, manageable, scalable, extendable, upgradeable, reliable, sustainable, SAP integrated, VAT compliant, audit trail'

Brochure MTD UK add-on for VAT

PowerPoint MTD UK add-on for VAT

Take aways 

Formal support and active involvement of senior management

Optimum process improvement or business transformations will not likely be realized by the sum of individual independent efforts.The risk is that individually everybody knows what needs to be done within his or her own area of expertise, but what is lacking is overall direction and thus progress.

Anticipate what users would want

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.

What do we like to achieve

  • Focus on tax processes that could be improved
    • Manual process: same data requests are made by different stakeholders
  • As Is assessment
  • Anticipate future changes and the data needed
    • What are tax trends?
    • What is happening locally and what should be considered across jurisdictions where you operate?
    • Anticipate new stakeholders and their data needs or requests (internal and external)
  • Define scope and actions for short, mid and long term
  • Write business case for change
  • Realize sponsorship for implementation

‘As is’ assessment, actions and business case

  • What tax data is requested and by whom?
  • What tax process can be improved and what can be automated?
    • CIT, VAT, tax data warehouse
  • What is the Return on Investment?
    • Hard saving: process improvement
    • Meeting (new) tax requirement
  • What systems are in use: SAP, Oracle, etc
    • By which entities?
  • How many end-use computing tools (e.g. excel spreadsheet) do we have?
  • How do we avoid an ad-hoc solution?
    • Understand the bigger picture
    • Real problem and not the symptom

Risk and reward

Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.

Technology tools & systems integration

Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.

Change and project management

VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

Effective communication and teaming

We speak the language of the business and IT and no translation is needed.

Set up a project plan

  • Set up a project charter that will take effect preferable during feasibility but ultimately during design
  • Write a business case and problem statement
  • Define scope of the project
  • Define objectives and goals of the project
  • Involve stakeholders and define priorities
  • Set measurable milestones
  • Ensure that the right sponsors provide buy-in.
  • Identify (project) risks and how to manage them
  • Jointly validate and refine the project plan and develop a roadmap to success
  • Hold regular meeting to track progress of the various work streams

From concept through completion and beyond

VAT should be considered in every aspect of the process, from concept through completion and beyond.

Managing by design

Looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

Global tax environment is in a state of fast change

The key to success in the management is the ability to translate tax knowledge into workable business processes.

Risk: a domino-like effect

With indirect taxes intertwining through the day- to-day operations of a company—raising sales invoices, moving inventory, paying suppliers, collecting cash—indirect tax risk can have a distinct and domino-like effect on the commerciality of an organization.

Tax audits and new technology

More than 80% of businesses are still using spreadsheets to manage their VAT compliance in at least one jurisdiction in which they operate, despite tax authorities around the world investing in better tools.

OECD's Standard Audit File for Tax Purposes

The SAF-T standard, originally created by the OECD (similar as BEPS), is intended to give tax authorities easy access to the relevant data in an easily readable format for both corporate income tax as VAT.

What if there are glitches in your data, input errors, empty fields, awkward descriptions in fields or apparent inconsistencies?