The Dynamics 365 Making Tax Digital for VAT capability is based on electronic message exchange and interaction with HMRC.
The process is started by a D365 user creating the following electronic message that is subsequently sent to HMRC …
‘VAT obligations request’ – requesting details of current VAT obligations
On submission, this results in HMRC issuing and D365FO receiving two additional messages …
‘Completed VAT return’ – as per last VAT submission received, no action required.
‘New VAT return’ – as per next VAT submission required for completion.
The New VAT return message then becomes the vehicle for the preparation and subsequent submission of the VAT return to HMRC.
Dynamics 365 tracks activity and progress of electronic messages through recorded actions and status’ as shown in the tables below.
VAT Obligation Request
The process diagram below illustrates the progression of the VAT Obligation Request message status in the dark boxes, with the D365 user actions bullet pointed in the boxes below.
VAT Return, Message Process
The process diagram below illustrates the progression of the VAT Return message status in the dark boxes, with the D365 user actions bullet pointed in the boxes below.
Fraud prevention headers are used by HMRC to ensure that they are sent
various snippets of user data when receiving VAT obligations requests and VAT
return submissions, and from July 2021 are a statutory requirement for the
Making Tax Digital API.
Dynamics 365 Finance is compliant with this statutory requirement, with
submissions to HMRC requesting consent to provide a range of client details as
shown in the screenshot below.