Making Tax Digital (MTD) for VAT: why you need to update your SAP ERP system as from 1st April 2021
Please note: the previous deadline for compliance was for VAT periods beginning on or after 1st April 2020. However, due to the outbreak of coronavirus, HMRC have postponed the deadline by one year - VAT periods beginning on or after 1st April 2021 must be submitted via MTD. We are currently in the process of updating our website to reflect this change.
With their Making Tax Digital (MTD) initiative, HMRC (Her Majesty's Revenue and Customs – UK tax authorities) have set their intentions to become one of the most advanced tax authorities in the world by enhancing the customer experience whilst also closing the tax gap.
The primary aim of Making Tax Digital is to make tax administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system by 2021, whilst also reducing HMRC’s overheads for managing tax affairs.
From a practical point of view, MTD for VAT requires businesses 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 mandates the use of functional compatible software, such as SAP ERP, to meet these requirements that must connect to the HMRC systems through APIs (Application Programming Interfaces). In order to comply with this mandatory requirement, PIKON have developed their “Integrated MTD-VAT Connector” for SAP.
Overview of the Integrated MTD-VAT Connector for SAP:
How PIKON’s Integrated MTD-VAT Connector for SAP makes your SAP ERP system compliant with the new MTD for VAT regulations
The Integrated MTD-VAT Connector for SAP calculates and submits VAT returns directly from SAP ERP (either SAP ECC or SAP S/4HANA) to HMRC via a digital link to the MTD platform. Because of that, it ensures a seamless digital journey for your UK VAT fillings and runs over SAP ERP as an end-to-end solution. This solution is fully integrated in SAP without an external interface or use of external software and SAP ERP release independent. It contains user-friendly screens, owns customised tables and owns transaction codes and menus.
Main features of the Integrated MTD-VAT Connector for SAP
- Selection of the relevant data from your accounts and calculation of the required figures for the “9 box” return
- Presentation of the figures to be submitted together with the standard HMRC declaration confirmation
- Submission of the figures to the HMRC MTD platform
- Logging of the results for future reference (e.g. username, time of submission, values submitted, submission confirmation reference from HMRC etc.)
In order to interact with the MTD API of the UK tax authorities, a version of SAP with the Open Authentication 2 Client (OA2C) is required. By standard, this is available with SAP Application Server ABAP 7.40 SP08. Additionally, SAP NOTE 2043775 must be applied if relevant to the system. This does not necessarily need to be the same system where the accounting data is stored – it can also be a gateway server.
In addition to this technical requirement, PIKON will perform a so-called “VAT Settings Health Check” to analyse your current VAT settings in SAP ERP and to see if these already comply with the MTD requirements. At the end of this analysis, you receive a paper with the analysis results and recommendations to further optimise your VAT settings in SAP ERP.
What to expect
- On-premise installation, no interaction with cloud-based services
- Self-contained SAP Add-On - does not interfere with existing programs/ processes
- Developed in PIKON's own Namespace /pikon/
- Web Dynpro or SAP GUI interface
- Simple transmitting of the data
- Uses existing VAT bookings to calculate the VAT returns
- Transparent reporting of all sending processes
- Utilises standard SAP communication processes to submit data to the HMRC MTD platform
- Supports various network topologies (e.g. communication via a Gateway server)
- Easy implementation through an SAP transport file
- PIKON is responsible for maintaining the SAP Add-On - MTD compliance in the long run
- No additional SAP licenses required
Why you need the Integrated MTD-VAT Connector for SAP
With PIKON’s MTD-VAT Reporter for SAP you have everything in place to have your SAP ERP system compliant with the MTD for VAT regulations before 1st April 2021.
PIKON takes care of everything: you don’t need to do anything to make your SAP ERP system MTD-VAT-compliant! Next to the implementation of the MTD-VAT Reporter for SAP in its own /pikon/ namespace, PIKON will also take care of testing this SAP Add-On in your SAP ERP system and will provide documentation and end-user support during the first VAT reporting period after MTD goes live. The implementation of this solution does not affect any existing processes.
This solution ensures that your SAP ERP system is MTD-VAT-compliant in the long run. For this, PIKON performs the maintenance of its MTD-VAT Integrator for SAP and therefore it will also be compliant with all MTD-VAT changes in the future. The solution is customisable, so if the reporting requirements change in the future, the configuration will be updated to reflect this.
Last but not least, with the PIKON MTD solution you avoid paying expensive additional SAP license fees or installing additional cloud-based solutions.