e-Tax Compliance

10 Key Questions About MTD for Foreign Companies

17.03.2020 (Updated)

UPDATED 03/31/20: Due to the current health crisis, the UK's Tax Authority HMRC has postponed the rollout of the second phase of MTD to April 2021.

Prior MTD deadlines (April 2020 and October 2020) have been moved due to the current situation to April 2021. As of said date, VAT declarations in the UK must be made electronically in accordance with the Making Tax Digital (MTD) timetable. This means that MTD’s soft landing phase ends in April 2021. Companies will no longer be allowed to send information manually. By that date, they must have systems in place to send the 9 BOX VAT return digitally in accordance with the criteria established by the HMRC.

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, making it mandatory to send the 9 VAT BOX return through an API approved software. MTD was launched in 2018 and will conclude its rollout on 1st April 2021.

What is a 9-box VAT return?

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

  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 are affected by MTD?

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 21, including those foreign companies who had been granted the 6 month deferral by the HRMC.

What is a hard link?

A hard digital link is the generation of information without any manual intervention.

What is a soft link?

It's the generation of information with manual intervention. It will only be allowed until the 1st of April 2021.

Recommendations for creating a hard link:

The easiest way is if it’s done automatically from your ERP or accounting system.

If your company does not use an ERP system, you will still be allowed to use an Excel spreadsheet, as long as there is no manual intervention (eg. Linking cells or using formulas). 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.

If you have further questions about how to prepare for MTD, please don’t hesitate to reach out to one of our experts.

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