e-Tax Compliance

10 Key Questions About MTD for Foreign Companies

17.03.2020
MTD-MAKING TAX DIGITAL-UK-FAQS-EDICOM

As of this year, VAT declarations in the UK must be made electronically in accordance with the Making Tax Digital (MTD) timetable. MTD’s soft landing phase ends in April, when companies will no longer be allowed to send information manually. By that date, they must have systems in place to send tax documents digitally in accordance with the criteria established by the UK’s tax authority, Her Majesty's Revenue and Customs (HRMC). 

Find out the most important information your company will need to comply with MTD requirements:

What is Making Tax Digital (MTD)?

It is the process implemented by HRMC to switch to electronic tax declaration. MTD was launched in 2018 and will conclude its rollout on 1st October 2020.

What is a 9-box VAT return?

The 9 box VAT return is a file with 9 fields for tax information that must be declared to HMRC using the MTD system.

What information must be sent to HMRC?

  1. VAT due in this period on sales and other outputs
  2. VAT due in this period on acquisitions from other EC Member States
  3. Total VAT due (the sum of boxes 1 and 2)
  4. VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EC)
  5. Net VAT to be paid to HM Revenue & Customs or reclaimed by company (Difference between boxes 3 and 4)
  6. Total value of sales and all other outputs, excluding any VAT. Include your box 8 figure
  7. Total value of purchases and all other inputs, excluding any VAT. Include your box 9 figure
  8. Total value of goods supplied to other EC Member States and related costs, excluding any VAT.
  9. Total value of all goods acquired from other EC Member States and related costs, excluding any VAT

What foreign companies does this affect?

All companies that are required to generate the 9-box VAT return, i.e. businesses that declare VAT in the UK.

When should these companies be ready to declare VAT digitally?

All foreign companies me be able to issue the 9-box VAT return electronically as of 1st April.  Some foreign companies for have been granted deferment by HRMC. These companies will have until 1st October 2020 to comply.

What is a hard link?

This refers to the generation of VAT information without manual intervention.

What is a soft link?

This refers to the generation of information with manual intervention. This type of content creation will be allowed only until 1st April or 1st October, depending on the company.

Recommendations for creating a hard link

This should be done automatically from your ERP or accounting system.

If this must be done in Excel, the accepted method is to link the information in the cells. Under no circumstances may information be copied and pasted since manual processing is not allowed.

How do I send in my 9-box VAT return?

It must be sent in JSON format using a HMRC-authorized API. The EDICOM platform is authorized by HMRC to convert your ERP files to JSON format and send them to HMRC in accordance with their requirements.

Can you change a 9-box VAT return after it’s been generated?

Changes cannot be made once it has been generated. If you need to make a correction, it must be done in the RECORD KEEPING SOFTWARE and re-sent to HMRC.

If you have further questions about how to prepare for MTD, please don’t hesitate to consult one of our experts with no obligation on your part.

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