Welcome and introduction
Hello, and welcome, everyone. Thank you for attending today. Just before we start the webinar, just a few housekeeping rules. So, all attendees will be muted and will remain for the whole webinar.
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So, this is our monthly webinar on key areas of NAV or Business Central. You can sign up for as many as you’d like on our website. I’ll show you that as the upcoming webinars at the end of the session. We also send out regular e-mails to register for the next month.
My name is Tiziana, also known as Deetz, and I’ll be facilitating the demo today. I’m an Account Manager here at TVision. I’ve worked here for 2.5 years and my background is 18 years in sales, marketing and partner management. Ian will be doing the demo today, and he’s a support consultant at TVision. Ian has been working at TVision for four years, and been using NAV and Business Central since 2000.
So, today’s webinar is about preparing you for your year-end VAT management, highlighting the obligations that are going live from the first of April 2021.
Some of you may have implemented Making Tax Digital, or you might have decided to defer this process. These obligations will be backed by possible penalties so we want to make sure we’re here to help you. So, these are the five top things we’re going to show you today about year-end VAT Management.
Making Tax Digital for VAT obligations, HMRC maintains a list of VAT obligations for companies that must report VAT and the due date for their submissions. HMRC communicates electronically with Business Central to retrieve the VAT return, Business Central records and stores your VAT obligations and the relevant periods for you to reconcile and to enable this submission.
So, what is a digital link. If you fall into the turnover above the VAT threshold, which is currently above £85,000, you are now required to follow the Making Tax Digital rules.
If your business uses more than one software package and to keep records and submit returns, these packages need to be linked digitally. There are various ways these can be linked including, for example, using formulas to link cells in spreadsheets, e-mailing records, putting records on a portable device to give to your agent, importing and exporting files, or downloading and uploading files. However, digital links do not include copy and paste and to move the data, and also does not allow manual adjustments and consolidations of group returns in spreadsheets.
New VAT Group Reporting in Business Central SaaS. Some companies have been asking for this and now you will be happy to know it’s available. VAT Group Reporting in Business Central focuses on group communication and the gathering of VAT data. This allows the group to submit combined return.
So, staying up to date with HMRC. HMRC have updated the rules on how to calculate boxes 2, 8 and 9 particularly for companies doing business in Northern Ireland. You might therefore need to update your system to accommodate these changes.
And last thing, the common problems and how to avoid them. Since the introduction of Making Tax Digital our support desk to solve some common problems, found the majority of the problems are caused by posting manually to the VAT control accounts and not posting full VAT entries correctly. If you avoid these areas, your submissions will be a lot smoother.
OK, so before we do the demo, and I’ll pass over to Ian, we’d like to get an idea of how Making Tax Digital already works for you. So, I’m going to launch a poll. So, if you’re submitting your answers, that would be great.
How is Making Tax Digital working for you – are you using it, and it makes your submissions easier, you’re using it but find you are doing more work, or you are not using it?
A few more seconds. OK, great. That’s showing that when you use that and making your submissions easier. So that’s, that’s brilliant.
So, I’m going to hand over to Ian who is going to go into a bit more detail about how to help you?
Hi guys. OK, so today’s demo, it’s about tax. I was trying to think of ways to make this exciting, but I couldn’t think of one. I’m sorry. So, you’re going to be talking about VAT for a little bit.
So first up, your MTD obligations. So, with the pandemic and HMRC did extends some deadlines for smaller companies to start using MTD. But now, those extensions have come to an end. So, if you’re one of those companies do it as an extension and you’re going to be starting to use MTD in the very near future, you need to have a word with us. It’s pretty easy to set up. We’ve set up quite a few of our clients now on different versions of NAV and Business Central.
But it’s not something that you can turn on and one hour later you’re doing your submission.You need to test to make sure that your network connectivity to HMRC is working. Your firewall isn’t blocking transmissions in either direction, your routers route the traffic correctly, and that your encryption algorithms meet HMRC standards. And all of that has to be tested first so it does take a couple of days of proper testing.
So, if you are coming to the end of your extension, and you need to start go live, have a word with us, well in advance, to make sure that this isn’t a problem for you. Then one of the things that Deetz was talking about was what is a digital link?
So, for your MTD, you have to submit your VAT digitally, And HMRC have got some pretty tight definitions on what they consider to be a digital submission. So, if you are using Business Central or NAV to record your VAT transactions, your invoices, purchases, sales, et cetera, and you’re using the MTD functionality within NAV or Business Central, then you’re compliant.
You don’t have to worry. If you want are one of those companies where maybe you’ve got two different systems, and you need to aggregate the information together to make your submission, perhaps you use a spreadsheet, third party solution, for example, then you’re not allowed to type the numbers into the spreadsheet.
You’re not allowed to copy the numbers from one screen on to another screen using Control C, control V, or copy and paste. You need a button to either send the numbers from NAV to your spreadsheet or a button on your spreadsheets to fetch the numbers from NAV.
Now I’m not sure how HMRC could audit that, but that is the rule that they’ve imposed. So, we need to abide by that rule. So, if you do need help setting up one of those links to be automatic and digital rather than manual and please give us a shout and we’ll help you. Now the VAT Group reporting. This is something that quite a few clients have asked about in the past and they’ve come up with manual ways to do the reporting when they’ve got a group of companies reporting together.
But now Microsoft have come up with a solution for this within Business Central SaaS at the moment. Obviously, they’re going to make this code available for Business Central on prem at some point.
But basically, if I go up into my setup and look at my assistant setup, I can see I now have this available, and by the way, I’m using version 17.4. And this is a fantastic thing. Yesterday I was using version 17.3 when I was doing my testing, and overnight, Microsoft updated me. I didn’t have to lift a finger and it didn’t cost me anything. I’m now just on the newest version and it’s working.
But we can see here there’s the setup group management which is new in version 17. And if we follow this through, and it starts talking about what we have to do. And the first question is asking is representative or member. So, the way that the Microsoft set this up – one of your companies you set up as the rep company. That is the one that’s going to interact with HMRC. The rest of your companies, you set them up as member companies, and you would carry on with this setup for each company. I’m not going to do it, let me exit out of this. And there is a help file which you can read through which guides you through the setup process.
And again, it’s quite lengthy but basically your member companies would do exactly as they’re doing at the moment. They would do the reconciliations. Look at their VAT statement, make sure they’re 100% happy, and then they would submit their VAT return. But instead of submitting it to HMRC what they ended up doing is they’re submitting it to the representative company. The representative company gives them a receipt. Then when all the subsidiary companies or member companies have made their submissions, the representative company can then submit to HMRC, and it will add together all the member companies.
Now, at the moment, this is new. And we are still testing it ourselves. So, we need to make sure 100% that it works in every scenario we can think of, what if you have an on prem company and a SaaS company? Does it still work? What happens with international trade and Northern Ireland trade? Does everything work? So, we’re still testing this, but once we’ve tested it, and we’re happy, if this is something that you are interested in, please drop Deetz a line.
Let them know that you’re interested. So, one of our consultants can walk you through how this works, and you can decide whether you want to keep your current manual solution or whether you want to move on to this more automatic solution.
Next thing I wanted to talk about was staying up to date with HMRC, staying up to date with your VAT. So, Brexit has happened. The transition period is over. And the way we work with Europe has changed perhaps the way you report VAT has changed as well. For some of you, it might have Well, some of it may stay the same. I’m not sure.
But you need to make sure that your system is set up correctly so that you can report what you are obliged to report. So, one of the first places you need to look is your VAT posting set up screen.
So, if we go and have a look at that screen, and we have a look at the VAT posting set up for this company, I’ve got my normal domestic customers. I’ve got my normal export customers, the rest of the world. And this is what I had set up for my EU customers, and you can see over here.
There’s the different rates of VAT. It’s reversed charge VAT and these are all the GL accounts used for that reversed charge VAT. If I am no longer using reverse charge VAT, and I’m treating the EU customers, and vendors as if they were the rest of the world, then perhaps, I need to change these to 0% VAT, and make this normal that, then, all of my customers and vendors know that will be charged. And it will be treated as if they were a normal export company.
But what if you still need to use reverse charge VAT for some reason for some of your customers and some of your suppliers? In that case, you would need to go to those customers and suppliers and change them from EU to export. So, on the customer code, or on the vendor code, you change their VAT business posting group from EU to export. Then, they will fall down here in this group. And 0% VAT will come through. And it will be normal VAT. You need to decide which of those two approaches is right for you, if you’re changing the way that you’re recording peps.
And in particular, if you have operations in Northern Ireland, we’ve got a couple of clients who have offices in Northern Ireland. Then your Northern Ireland offices, they can still treat their EU VAT differently to the rest of the world. Whereas, for UK businesses, we’re not allowed to treat them as EU any more. Sets those different rules for Northern Ireland and the rest of the UK.
Now, we’re not tax consultants. I’m not a tax consultant, certainly, So I can’t tell you what you should be recording. That is for you to decide with your tax experts. But once you’ve decided what you should be recording, and if you think you need to change your setup, then by all means, give us a shout, and we’ll help you change your setup in the best way possible.
But it is something worth thinking about. Perhaps, you need to go onto HMRC website and just have a look at those rules.
Make sure that you’re in compliance. And especially guys, if you’ve got operations in Northern Ireland and office, then boxes 2, 8 and 9, I know that the rules have changed on how those are calculated and reported. So, you just need to have a double-check there that you’re still recording of it correctly.
Now, fortunately, if you have a standard VAT statement setup, if you’ve made either of those two changes that I just spoke about on the VAT posting setup, your VAT statement is still going to work. If you’ve got a slightly non-standard VAT statement, if you’ve modified it at all, then you might want to come to your VAT statements. Let’s just have a quick look there as well. Have a look at your VAT Statements. Any look at my GB statement, and just double check these calculations that you’re using, which come from these postings down here, are they still correct.
Do you need to update anything here? Do you need to move something from one box to another box? Um, if you do, again, that’s something you need to decide what to do in conjunction with your tax consultants, tax experts. But if you do need to change this, and you are unsure how? By all means, please give us a shout, and we’ll help you make the change. But you need to decide what change to make.
So, this is the other place where you might need to tweak your system for the new rules. Right, the last thing I wanted to speak about was, we’ve had MTD going for about a year now. And we have had some calls on the help desk. And those calls have, 90% of the time. It’s been two particular reasons.
And the first reason is people have posted in manually to the GL tax accounts. So, let’s go and have a look at our general ledger, our Chart of accounts, but just see what I’m talking about. So, within my Chart of Accounts, somewhere in here, I have VAT Accounts. In preparation, I set up a little saved filter, so it just shows me my VAT accounts, and you will notice direct posting. I have turned this off all of my VAT accounts except this one. And I’ve only left this one open, because I’m going to use it as part of the demo in a few minutes. But you should turn off direct posting to all of your VAT control accounts. This stops anybody manually posting entries in here.
If you post a manual entry in here, your general ledger, it may look incorrect. When you come to do your Calc and Post VAT routine, it’s going to ignore those manual entries. It will only pick up entries that the system has generated itself. So just save yourself the heartache and turn off manual posting to all your VAT control accounts.
If you allow it and you post something in here, at some point in the future, you’re just going to have to reverse that posting and take it back, and it shouldn’t be there. Now I have two GL accounts here, which are full VAT. So, this is where I would post any VAT corrections in these two accounts. If I’m posting VAT correction, I need to turn direct posting back off. But, again, this isn’t something I should be doing every day. This should be a rare occurrence, which is why I say, turn it off if you have to do a correction. I’m going to turn it on for the relevant account, make your correction and then turn it off again so that people don’t make mistakes, and it saves you the heartache and trying to fix them later on.
And that comes to the second error. The second error is, when people do their full VAT or 100%VAT transactions, and perhaps they do them incorrectly. So, when I say full VAT transaction, a typical scenario is, perhaps you’ve received an invoice from one of your vendors, and they charged you VAT when they shouldn’t have charged you VAT. Or they didn’t when they should have. Or they charged 20% VAT when it should have been 5% VAT or something like that.
And you need to correct that invoice, but just the VAT portion of it, not the rest of the invoice. You have a couple of options. One option is to just send that invoice back to the supplier and say, Please, send me a proper invoice, but that might not always be possible.
Perhaps customs clearance happened on everything, and you can’t change the documentation. Now, in cases like that, you need to post a 100% or a full VAT, as we call it, transaction.
There are a few ways you can do it. You can do it through a journal, a general journal, or a purchase journal, or even The Sales journal. All you can do it through a sales or a purchase source documents, so you can do it through a credit memo, or a purchase invoice, or a sales invoice, for example, if you’ve done that incorrectly to one of your customers.
So, I’m going to show you, I want to do a full VAT entry from a purchaser who charged us VAT when he shouldn’t have and we want to correct that. I’m going to do it through a purchase credit memo, so, I can go and search for it, or I can use my menus and look for purchase credit memo.
I was looking earlier, so I knew exactly where one was, I don’t have any, so I’m going to create a new purchase credit memo. And I just have to tell, who is the vendor, who’s going to be my worldwide importers? There is a document number associated with this, then there it is. It’s not for an item. It is for a GL account.
So, it’s getting to my general ledger, and it’s going to go to that VAT correction account that I had set up. I know it started with 4, 6. And then we go, 4, 6, 3, 3, 0, my purchase for VAT GL Account. So, I select that. I can put in a meaningful description to say why I’m doing this, instead of taking that default description.
It’s for one unit, and they charged us £200 VAT they shouldn’t have charged u. So, I want to correct that. Now, if I look down here in my statistics, the system saw 200, and it figures out to 40% VAT goes on top of that.
So, it’s going to post this to the GL Account, and that’s not what we’re trying to do. So, immediately, this is showing me some things wrong. I need to come alone, and if these columns aren’t visible, you’re going to have to show them. I need to change the way my VAT is being posted, and I’m going to change this from Standard, too, full VAT normal.
And as soon as I’ve done that, the system’s picked up. The invoice is not zero amount, but all of the value is going to VAT. The system is going to automatically post this into the VAT account for me.
In fact, let’s close this document and see exactly where it goes. So, I’m just going to say cost and post. Do you want to post to credit memo? Yes, it’s being posted, and let’s go back to our chart of accounts and see exactly what happened with that transaction, and, back to my Chart of Accounts.
And within the chart of accounts, if I find that VAT account again. There we go. It’s posted in there, and you will see the £200 is posted with zero VAT on the 200.
And if I do a quick filter, and I say show me a filter where this is a system generated entry. So, a little bit further down here, the system created entry. I only want to see system created entries that’s updated. The system recognises this, the system created.
So, my calc composed VAT is going to take this into account. If I’ve just done this manually without using the full VAT posting, Calc and post VAT would ignore this. It would not like it is a system generated.
Now I could have instead of using a credit memo, I could have used a journal to do that. I did in advance prepare the general journal which would do exactly the same task. So, if we have a quick look here, when it opens, for some reason, because this is live TV, it’s taking its time. I’ll give it another 5 seconds. If it doesn’t work, I’ll just tell you about it instead. OK, it has worked hallelujah.
So again, I choose it, Credit memo GL account. I choose an exact same GL account. Again, I can change the description. I’ll put minus £20 here. I should put have put minus £200. But, once again, I need to choose my full normal VAT was posted. Which will then allow me to post this as a full VAT entry, and it’s balancing against the vendor. If I posted this, it would have exactly the same effect as close to the credit memo.
You can use whichever one makes the most sense for you, Whichever one you find easiest. I like the credit memo myself. It makes more sense to me. But if you’re a hardcore finance person you want to use a journal. That’s perfectly acceptable as long as you post it as all that. So, the system knows where it came from.
So, we spoke about your obligations we spoke about a digital link. I’ve mentioned that the group VAT has now become available. You might need to tweak your system, to stay up to date with HMRC, your VAT reporting obligations. Again, you need to decide what to do. We will help you do it if you do get stuck. And common problems to avoid is avoid those manual postings into your VAT control accounts and if you do need to do VAT correction, use a full VAT journal or a full VAT source document.
That’s it from me, Deetz, did any questions come through while I was busy?
OK, well, thanks, Ian.
Questions and Answers
Yeah, if anybody has got any questions from the demo, if you’d just like to submit them now, in the question box, we’ll give you a few minutes. But in the meantime, we did have some questions Ian while you were doing the demo.
So, someone’s asked: I saw a presentation that mentions you now have Bevica Business Central SaaS. Is that compatible with the Making Tax Digital VAT?
OK, right, so, Bevica is our Drinks Industry Solution, which it go live recently. Yup. So, the way that SaaS works, Business Central SaaS works. Our basic solution, we didn’t actually modify the code within the product. Our code sits on one side and adds to Microsoft’s product. So, everything that was inside, Business Central is still there, so all that VAT reporting, all the setup, it’s still there, still works 100% regardless of our add-on. So yes, the short answer, it does work, and it’s because of that new way that Microsoft is letting us design our products and add-ons.
OK, we’ve got one here, we have been using Making Tax Digital. We need to make further changes for Making Tax Digital? Apart from those changes that I mentioned.
So, you know the way that your Making Tax Digital works, you’re set up your tokens, retrieving your periods, suggesting your lines, submitting your return. That procedure still works the same. It still does the same reconciliations between your general ledger. Your VAT statement, your Calc and Post VAT. That stays the same.
The changes that you might need to make is you may need to change your VAT posting setup. Or you may need to change your customers and your vendor’s setup. If you’re reporting VAT transactions for those vendors and customers differently, to what you were while we were members of the EU.
Again, if you’re in any doubt, you can go to HMRC’s website and they do explain. It’s in very legalese type of language. Then you can ask your experts, your VAT consultants, or accountants and auditors.
They’ll also be able to help you with that, and if you do need to make a change, by all means, give us a shout to help you make a change. But, you know, you need a VAT expert to tell you what that change should be, I won’t tell you that.
Time for one more? Yeah, let’s do one.
How can I guarantee that nobody posts VAT into the GL manually?
So, as I explained, if you turn off that direct posting, so in the chart of accounts and this company, I’ll quickly demo that, and within the chart of accounts, I did have one VAT account where I was allowing manual postings just for purposes of this demo. I’m going to go turn that off, and that’s what you should be doing for all of your VAT control accounts. So, it’s this one where it’s turned on. I simply go in here. And this works for NAV and Business Central.
Turn off, direct posting, now, so no one can post manually to this account anymore. You might also say, the Posting date ranges. So, in your GL setup, or in your user setup, you can restrict people’s posting dates to make sure that they’re not posting in a range that you’re not happy with. So, you’ll also want to make sure that you’ve got that locked down pretty neatly as well. But the big thing is, make sure that you turn off your manual posting here so people don’t accidentally post into these accounts.
Brilliant. Thank you.
Five key takeaways
OK, all right, let’s leave you with some key takeaways, which I hope will assist you. So, GL accounts. Ensure that you have remove the tick from the VAT Control Accounts, and also make sure that your users know how to use the full VAT option.
Check VAT Statement Setup, review particularly boxes 2, 8 and 9, especially for those of you that are operating in Northern Ireland.
Do your reconciliation before submitting, you can reconcile the GL accounts.
The VAT statement and Calc Post VAT routine. They should all be giving you the same result.
Regularly, review your VATs setup, ensure your customers, vendors, and products are assigned to the correct VAT posting groups. This ensures it will flow correctly into the boxes on your return.
Lastly, don’t panic. We’re here to help you to make sure your VAT submissions go as smoothly as possible.
So please feel free to get in touch with us if you have any concerns, or need help updating your setup.
So, we hope you found this webinar interesting and informative. We shall be sending out e-mails to register for the next month. And we shall also put a reminder about the webinar on using that here as well.
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