Making Tax Digital with SAP – UK HMRC’s Initiative

This blog will provide you with an overview of UK HMRC’s Making Tax Digital (MTD) and how you can achieve this mandatory requirement with SAP – Making Tax Digital is a key part of the UK government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs

Digitisation in all economies is bringing very rapid transformation between the governments and its citizens. Tax authorities are ever striving for efficiency with a focus on increase in revenues – one way to achieve this is by enabling the right technology, networks and security channels to obtain real time visibility of an individuals or businesses obligations and the ability to analyse the right level of detail to enable better audit management, review of refunds – achieving its goals.

As part of the 2020 Roadmap, the HMRC has a bold vision for the future of the tax system in the UK – to become the most digitally advanced tax administrations in the world. The focus will be on simplification of tax and the information the HMRC hold, tax in one place giving individuals and businesses a single picture of liabilities and entitlements and finally making tax digital for individuals and businesses. Making Tax Digital (MTD) is an initiative to achieve this vision.

How can SAP help with Making Tax Digital for VAT?

MTD for VAT requires business to keep digital records and accounts, which needs to be digitally linked – including all data transfer or exchange within and between software and applications. MTD finally mandates the use of functional compatible software to meet these requirements that must connect to the HMRC systems through APIs (Application Programming Interface).

The HMRC is working with software providers for Making Tax Digital for VAT in time for April 2019 – the requirements will become mandatory from this date.

MTD does not require you to keep additional records for VAT, but to record them digitally – Digital record keeping is something that has always been provided by SAP ERP Financials. The key change is the method with which HMRC receives the VAT obligation information from you.

SAP covers this requirement with SAP Advanced Compliance Reporting Service – delivered through the SAP Localisation Hub. The SAP Solution is listed as a Supplier supporting HMRC’s MTD for VAT initiative.

The SAP ACR Service is built on SAP Cloud Platform (SCP) and delivered as a SaaS solution – enabling a central framework for reporting compliance delivery, it is platform independent built for the cloud. The solution enables you to generate and submit statutory reports that contain country-specific indirect taxes (such as, value-added tax). These tax computations are in accordance with the guidelines defined by the local tax authorities.

SAP ACR Service provides the pre-packaged MTD requirements for rapid service activation and on-boarding with guided setup enabling a good time to value delivery option. The administrative setup will confirm the API and Secured connectivity with the HMRC System as shown below delivered through Fiori tiles:

For SAP ECC customers (and versions below SAP S/4HANA 1610) the service brings together all the required tax detail from SAP ECC into the ACR Service and thereafter enabling the preparation and generation of the HMRC obligations you need to report, providing a review and submission process. With the HMRC secured API based authentication already covered – the submission is sent to the HMRC and a confirmation receipt arrives back. The solution provides full audit trails and traceability which will tie in with your HMRC Digital Tax Account

For VAT registered companies that may be on non-SAP system or required submission through data loaded via excel – this capability is also covered by the service.

For customers on SAP S/4HANA 1610 onwards or SAP S/4HANA Cloud the process is streamlined further – the steps to prepare > generate > review and submit are fully covered within the SAP S/4HANA Advanced Compliance Reporting solution available with Enterprise Management also known as the Digital Core of the Intelligence Enterprise (also named ACR but note this solution is different to the localisation hub’s ACR Service). You then utilise the ACR Service to transmit the VAT return to and get confirm return from the HMRC via the API process delivered by the service.

An Overview of the Solution MTD for VAT report creation steps and tax submission analytics:

Finally would you like more information on SAP Advanced Compliance Reporting Service for Making Tax Digital in the UK?

UK Country Page: https://www.sap.com/products/globalization/accounting-finance-module/northern-europe.html