What is Making Tax Digital?
Making Tax Digital (MTD) is an HMRC initiative that requires UK businesses to submit their tax returns and payments online, while also keeping digital records of their taxes.
There are three important components of the Making Tax Digital initiative, which are:
- Digital Records: Your transaction data will need to be stored digitally, and there are certain stipulations put forward by the HMRC on what details you’ll need to store.
- Digital Links: Your VAT returns must have ‘digital links’ to digital records. VAT Notice 700/22 includes examples of where a digital link is required and how you might use one.
- Digital Submission: All VAT returns will need to be submitted digitally via HMRC’s Making Tax Digital API.
You can learn more about what is expected from the HMRC and how this is likely to affect you in their official VAT Notice.
You'll need to sign up for Making Tax Digital before you can submit VAT Returns directly from Brightpearl. Learn more here: Sign up for Making Tax Digital.
Setting up the app
To begin submitting your VAT returns from Brightpearl you will need to:
- Install the app
- Add authorized users
- Authorize the app
How to install the HMRC app
The first step in setting up the HMRC integration is to activate it in the App Store:
- Select the App Store link at the top of the screen.
- Find the HMRC integration app.
- Select Turn on.
Authorizing staff to submit VAT Returns
Only staff added to the app's list of authorized users will be able to use the View obligations and Export buttons in the VAT Return screen.
- Once the app has been turned on click Configure > Manage users from the App in the App store
- To add more staff members select them from the drop-down menu and click Add
How to authorize the HMRC app
Brightpearl requires your permission to view VAT Return obligations and to submit VAT Returns on your behalf.
- Navigate to the HMRC app in the App Store and select Configure.
- In the modal window that appears, select Authorize Brightpearl to submit VAT returns.
- Follow the prompts in the new window for authorisation, which will require you to log in to your Gov.uk account, and select Grant authority.
- Once authority has been granted, return to the Brightpearl modal and enter the VAT Registration Number (VRN) for your account and select Update. If you see an error after entering your VRN, please read the FAQs for more information.
Warning: If you change your HMRC password, you will need to revoke the Brightpearl authority and re-authorise the app again. As part of HMRC's verification requirements you will need to go through the process of re-authorising Brightpearl to submit VAT returns every 18 months.
Viewing your VAT Return obligations in Brightpearl
From within the VAT Return screen, select the View obligations from HMRC button. This will show within Brightpearl a list of all VAT returns that HMRC tells us are due to be submitted.
From here you can select the obligation you require, which will enter the appropriate dates into the VAT return screen in Brightpearl. Click Show VAT form to preview the VAT return for the selected date range.
Submitting your VAT return to HMRC
If you have earlier unreconciled transactions that you want to include in your VAT return, you should not reconcile these transactions until after submission to HMRC (as it would otherwise not be possible to include these transactions in your return).
How to submit your VAT Return
You will have the opportunity to view the VAT return data before submitting finally. Please ensure these figures are as you expect in the pop-up window before selecting the 'Submit VAT return' button.
- Select Submit to HMRC.
- Select the date range you want to you want to submit your VAT return for, choosing whether to include or exclude any earlier unreconciled transactions by ticking the box, and select View VAT Return data.
Note: Your selection for the 'Include current reconciled', and 'Include earlier unreconciled' will not be carried through from the VAT return screen previously, so please ensure these are set here correctly.
If you are using Brightpearl's 'Tax regimes' settings, please select the 'Respect tax regimes...' option, otherwise leave this unselected.
- This will display the VAT return data that you are about to submit. Take a moment to double-check these are the values you are expecting. If you are happy to submit this information to HMRC, select Submit VAT return.
- Upon submission you will be shown a confirmation.
- Reconcile the VAT return in Brightpearl, so that the balance on the Sales and Purchase tax control accounts are cleared down, and the total is transferred to your VAT liability account.
You will then be able to view the submitted information by logging into your HMRC account.
Frequently asked questions
Why is my VAT Registration Number (VRN) not working?
If you see an error after entering your VRN then you've entered a number that HMRC says is invalid. There are several reasons why this might be
- You haven't yet opted in to Making Tax Digital. This is a pre-requisite for the integration. You can opt in here: https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat
HMRC says this process can take up to 72 hours, although is often quicker
- You have entered the VRN incorrectly. Please ensure you're entering the 9 digit number, without the country prefix
- The account that you've logged in with is not linked to the VRN entered. In this case, please revoke authorisation for the account you have logged in with, and re-enter the correct account details.
Why are Boxes 6-9 not showing decimal places?
HMRC require that we submit these values rounded to the nearest whole pound.
For more information on exactly what the HMRC are changing, take a look at these Government resources below: