MTDfV

In the United Kingdom, Making Tax Digital for VAT (MTDfV) requires that digital records are kept and sent to the MTDfV web service electronically.

The quarterly, monthly, and annual VAT returns have been submitted online to Her Majesty’s Revenue and Customs (HMRC) website since 2010. The MTDfV builds on that initiative by integrating digital record-keeping of VAT returns to provide a single, seamless process with quarterly updates that are generated and sent directly from the software the businesses use to keep their records. This is known as Making Tax Digital for VAT (MTDfV).

The compatible software must include these functions:

  • Keeping records in a digital form as required by the regulations
  • Preserving digital records in a digital form as required by the regulations
  • Creating a VAT return from the digital records held in functional compatible software and providing HMRC with this information digitally
  • Providing HMRC with VAT data on a voluntary basis
  • Receiving information from HMRC in relation to a relevant entity’s compliance with obligations under the regulations

This diagram shows the main components of the MTDfV solution:

lclpov_12.x_taxreporting_UK

VAT return data is sent from the ERP or uploaded independently through ION into the LSP database. The grouping functionality is used to consolidate multiple VAT declarations from different sources into a single submission. Each submission can be reviewed before it is submitted to HMRC. In addition, information on returns, historical liabilities, and payments can be retrieved from HMRC and reviewed.

This table shows the MTDfV functions that are supported in LSP:

Functionality Description
Submit VAT Return Submits a VAT return data directly to HMRC

Prior to submission, the details of the VAT return (9 boxes amount) can be viewed for review and verification. The taxpayer must confirm a declaration before sending the return directly to HMRC.

Frequency of submission could be monthly, quarterly, or annually.

Verify Submitted VAT Return Shows the submitted amounts and generates submitted VAT return data from HMRC for validation

The In Balance status verifies if the submitted information for the selected tax period is equal to the generated data from HMRC.

View VAT Liabilities Generates the liabilities and charges information whose To date falls in the requested date range

The report generated includes this information:

  • Charge type of the liability
  • Original amount
  • Outstanding amount (if applicable)
  • Due date for payment
View VAT Payments Generates information on payments that have been used to offset liabilities whose To date falls in the requested date range.

The report generated includes this information:

  • Amount allocated to a liability
  • Date when payment was received (if available)

Connectivity is provided through ION API or the UK Tax Authority connector.