Digital VAT Submission - read here before you begin!

Don't have time to read, watch the instructional video here:  

HMRC Guidelines

TPH cannot advise you on how to register for MTD with the HMRC, however below is a helpful video link from the HMRC.  Digital tax is effective beginning April 2019, this means your first tax period starting on or after April 1st will need to be filed digitally.  For most productions the first VAT period will cover April - June 2019.  If you are unsure of when you need to file your first digital tax return, it is best to check with the HMRC.

How to sign up for HMRC Digital VAT Submissions:  https://www.gov.uk/vat-record-keeping/sign-up-for-making-tax-digital-for-vat .  HMRC will send a confirmation email within 72 hours of signing up. They advise not to submit a VAT Return until you receive the confirmation email.  You must register for Digital Tax with the HMRC at least 7 days before submitting your first digital submission and at least 5 days after submitting your final non-MTD vat return.

Before you begin in Eclipse

• We recommend you bookmark this Digital VAT helpdesk article located here. The linked article contains a list of common VAT Submission questions and issues.
  
  

• We recommend you calculate your VAT using the Period Method as it is the most accurate method and allows you to use multiple VAT accounts instead of just one VAT account code for the duration of your entire production.

  • To do this close the period at the end of each VAT reporting period and use the period range to group transactions. You can see further instructions on how to do this here.

  • If you are wanting to setup and use multiple VAT account codes for each submission, please see this guide here. Normally, the Eclipse MTD Module will only accept one VAT account code per submission unless you follow the above guide to setup your VAT accounts (eg using monthly VAT accounts but submitting VAT quarterly).
    
    

• If you are using the Date Method or Reconcile Method to calculate your VAT, you must only use ONE VAT Account for your entire production. You cannot split the VAT Accounts into quarterly or monthly accounts as these calculation methods are not compatible. The Period Method allows you to use multiple VAT Accounts.
  
  

• A lot of users use a date range to calculate VAT but a word of warning. Even though Eclipse warns users that a date being posted is outside the threshold set in system defaults, some users still manage to post transactions into the distant future or past. The problem is that those transactions will not be picked up using a date range method. Users can also accidentally post transactions with dates that have already been reconciled and hence will not be included in the next VAT reconciliation.  This is why we recommend always using a period range versus a date range when calculating VAT. Before you choose to submit using Dates, please read the pitfalls of submitting VAT using dates here or you will run into issues with your VAT calculations.

Digital VAT Reporting

Below is the written instructions, to view as an instructional video, please visit:  https://www.youtube.com/watch?v=BZLqlO2eyWE  

Digital Tax does not affect when you report to the HMRC, it just changes how you submit the information. Please follow your usual VAT reporting period dates, if you are not sure what those are, please consult the HMRC.

1. Go into System Defaults > Company Details tab.  Make sure all your company details are accurate. Company No is your company registration number, not your VAT number.

2. Run your VAT Report manually like you normally would, to check everything is flagged correctly and the amounts are correct. 

• Check anything dated or posted to a period beyond the current VAT period is correct.  Instructions for running a VAT Report are located here.

3. In Eclipse go to General Ledger > VAT Submission.  The VAT Submission window will appear.

Open

4. Enter your VAT Registration Number in the VAT Rego field.  

Open

5. Click the Check Obligation button.  The HMRC portal window will appear within Eclipse.  Scroll down in the window and click the Continue button.  Enter your HMRC portal login information and click Sign In. Click Grant Authority.  Your current VAT reporting period will be populated in the VAT Period field.  Make sure this is correct before you continue.  If it is not contact Eclipse support.

6. Enter in the Search range for the submission.  You have a couple of different options for how to pull the transactions from the General Ledger:

• (RECOMMENDED METHOD) Use Ledger Period:  If you close your period at the end of each VAT reporting period and you use Cash Accounting principles, it is recommended that you use the Ledger Period.  Enter in the Ledger Period To and From fields.  It is recommended to leave the From Period as 0, to pickup any items have been posted back to a period where a return has already been run.  Then tick only the Use Period checkbox.  

• Use Date:  If you use Accrual Accounting principles, or did not close your period at the end of your VAT reporting period it is best to pull transactions by Ledger Date.  Enter the Date To and From range fields.   If you reconcile your VAT account in Eclipse at the end of each VAT submittal, it is recommended to have your from date as 01/01/1970, to pickup any items have been posted back to a period where a return has already been run.  You must then tick the Use Dates checkbox. This method requires that you use ONE VAT account for the entire production. It will not work if you split your VAT accounts into quarterly or monthly accounts. 
  
  

• Use Reconcile:   If you diligently reconcile your VAT account at the end of each submission, you can tick Use Reconcile.  This method pulls all unreconciled items from the VAT accounts listed and ignores the Ledger Period and Ledger Date ranges. This method requires that you use ONE VAT account for the entire production. It will not work if you split your VAT accounts into quarterly or monthly accounts.

7. Enter the VAT Accounts and their applicable VAT codes. For each VAT Code, list the TX Flag(s) in the first column and enter in the Account Code in the second column.

• VAT EC Acquisitions Code:  Purchases made from EU suppliers (Zero-Rated EU).  Enter the TX Flags and cost code where the VAT EC Acquisitions transactions have been coded.

• VAT Due On Outputs:  Sales to UK Suppliers (Accounts Receivable).  Enter the TX Flags and Account Code where the transactions for have been coded.

• VAT Reclaimed On Inputs:  Purchases from UK Suppliers (Accounts Payable).  Enter in the TX Flags and Account Code where the transactions for have been coded.

• EC Supplies Code:  Enter in the TX Flag for your EU sales (only applicable if you provide goods or services to another EU country).

8. You can tick Create CSV Report before clicking Calculate to generate a ledger output of the calculation to Excel.  

This report goes over the entire ledger with your search criteria (ie dates, period) and looking at the all the transactions with your tax flags entered (ie. V, R, N).  It's then summing them to get a figure, then taking away the VAT paid figure (SUM of VATReclaimedOnInputs-All minus what’s in the Vat account, VATReclaimedOnInputs).  

To see more information on the VAT CSV Reports please view this article here.

Note:  If you have run this report once, to rerun, you will need to close and reopen the VAT Submission window.

Note:

• Multiple flags can be used by separating each flag with a comma (e.g. V,S,T,R).

• Only one account code can be entered per line.

• The account code must be entered in the following format:

Currency (2 characters), Location (2 characters), Episode (3 characters), Prod (4 characters), Detl (4 Characters), Set (3 Characters)

If any of your codes do not match the maximum fields per sub-type, then you must use a space to pad out the remaining characters. 

Example: The account code GB 01 000 800 01 001 contains

• GB = 2 out of 2 Currency characters

• 01 = 2 out of 2 Location characters

• 000 = 3 out of 3 Episode characters

• 800 = 3 out of 4 Prod characters (you will need to pad with one space)

• 01 = 2 out of 4 Detl characters (you will need to pad with two spaces)

• 001 = 3 out of 3 Set characters

It must be entered as: GB01000800_01__001  ( _ represents space)

9. Click the Calculate button to populate your VAT calculations. Check each total and make sure these are correct and that they match your VAT Report before you submit it to the HMRC Portal.

Note:  If the Totals are incorrect, check the TX Flags on the transactions to make sure they have been entered correctly. 

10. Tick the I Agree checkbox, then click the Submit button.  The HMRC Portal window will appear again within Eclipse.  Scroll down in the window and click the Continue button.  Enter your HMRC portal login information and click Sign In.  Click Grant Authority.  This will complete your VAT submission and send it to the HMRC Portal.

Note:  You will not be able to change the TX flags on the transactions after you have submitted your VAT, so make sure these are correct before submitting. All transactions involved in the submission will be tagged as part of this submission in the general ledger . Make sure no users are posting any data during this process as the figures could change between when you calculate and submit your data.