VAT Return: Making Tax Digital

Overview

HMRC mandated the use of Making Tax Digital services to digitally record transactions and submit VAT returns for VAT periods commencing on or after 1st April 2019. This means that all VAT-registered businesses with taxable turnover above the VAT threshold will be required to submit VAT returns digitally. 

To ensure you are compliant, we have a feature that will enable you to digitally file VAT Returns using MTD services for your practice.

Signing up with HMRC for Making Tax Digital

To use Making Tax Digital services, users must register with HMRC. For further information see HMRC's detailed guidance at https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat.

Once you have registered with HMRC for MTD you will not be able to file a VAT Return using the old method. Only register with HMRC when you are ready to file using MTD services.

You should ensure that you have signed up at least a week before you intend to file your next VAT return.  Note that if you are currently paying VAT by direct debit, you cannot sign up in the 7 working days leading up to, or the 5 working days after your VAT Return is due.

Step 1: To set up this new feature from within DRIVE, go to Tools > Settings > General > Practice Details.

1. the Country of Incorporation, which must be the United Kingdom or Northern Ireland 
2. The VAT Registration Number (VRN) of the practice

You will then be able to access 'VAT Returns' on the left panel under the desktop module. From here you will also be able to access the old version of the VAT Return (if the last finalized VAT Return end date is less than 31st March 2019). In all other cases, old VAT Returns can be viewed using the Reports module.

Authorisation Process

Step 2: Is the Authorisation process. To set up the Authorization select 'VAT Returns' from the Drive Desktop.

You will be notified that you are being redirected to the HMRC website where you will need to follow the prompts to authorize DRIVE to interact with HMRC on your behalf.

Select OK.

Select Continue after reading all of the relevant details.

Enter your User ID and Password and click on Sign In to continue. These details are your Agent/Business ID and Password as provided by HMRC, please contact HMRC directly for any queries relating to your User ID or Password.

You are now ready to grant DRIVE authorisation to interact with HMRC. Select Grant authority to continue. Authorisation will be granted and an Authorisation code will appear. Select Copy.

Return to Drive, a window requesting the authorization code will appear, click into the field and right-click and select Paste. 

Then select OK.

When Authorisation has been granted DRIVE will make a call to HMRC, requesting all outstanding VAT liabilities and obligations from HMRC for the practice. You will be notified when this action has been completed, select OK.

At all other times, VAT obligations and Liabilities will be updated automatically 30 days before the end of the next VAT period end date. The information returned from HMRC will automatically be displayed on the screen in the VAT Return module. In the example on the next page, you can see 3 separate VAT Periods, two of which show as Fulfilled and one which is Open.

New VAT Return Window

The new VAT Return window includes the following new columns.

1. Start Date - This refers to your VAT Return period start date.
2. End Date - This refers to your VAT Return period end date. 
3. Due Date - This refers to the VAT Return Due Date.
4. Date Received - This refers to the date HMRC received your VAT Return.
5. Original Amount - This refers to the VAT Return amount submitted and due to HMRC. 
6. Outstanding Amount - This refers to the outstanding amount still due to HMRC for the return.
7. Return Status - This refers to the VAT return status with HMRC. The Status types are: Open or Fulfilled.

Open indicates that you have a VAT Return due to HMRC for that period

Fulfilled indicates that you have already submitted the return to HMRC and you have received confirmation from HMRC that it has been received by them.

New icons on the VAT Return Window

The new VAT Return window includes the following new icons.

1. Generate - This option will generate the VAT Return of the highlighted VAT Return.
2. Submit - This option will submit the VAT Return to HMRC of the highlighted VAT Return.
3. View Return - This option will display the VAT Return Report.
4. VAT Payment - This option will retrieve the VAT payments made to HMRC for VAT.
5. Liability - This option will retrieve the VAT Liabilities recorded by HMRC.
6. Make a Payment - This option will redirect you to the HMRC website where you can pay your VAT liabilities.
7. Check Status - This option will check with HMRC as to the Status of all VAT Returns on screen and update the Return Status, Date Received, Original Amount, and Outstanding Amount accordingly.

VAT Return - VAT MTD Exceptions

We have a section on MTD VAT Returns for Exception VAT Details.

Transactions that have been excluded from the Generate VAT Returns Summary will be listed. The Generate VAT Returns Summary will exclude all NON-UK, NON-NI, and NON-EU country clients.

VAT Return - VAT Due on Acquisitions from the Other EC Member States

On the VAT MTD Return Report, in the Summary, at the top of the Report VAT due on acquisitions from the other EC Member States will be shown separately and in the VAT Rate Breakdown section the detail will be shown under its own separate heading.

Summary & VAT Rate Breakdown

Details of Each Invoice or Receipt

VAT MTD Authorisation Expiry Information Message

We have an information message that appears if your VAT MTD credentials have expired. According to HMRC guidelines, your MTD credentials for VAT will be authenticated through their site. Your VAT MTD credentials will expire after 18 months, at which point you will now receive an information message notifying you and you will be redirected to HMRC website to re-authenticate.