Deprecation of VAT return direct submission to UK MTD in Dynamics
Introduction
Since 2019, Dynamics 365 Finance has supported direct system-to-system integration with the web service provided by His Majesty’s Revenue and Customs (HMRC) to submit Value Added Tax (VAT) returns for UK-registered companies under the Making Tax Digital (MTD) project.
Due to security requirements, we must modify our implementation approach. We can no longer support this integration for on-premises deployments of Dynamics 365 Finance.
Deprecation scope
To meet security requirements, we are implementing modifications to the Dynamics 365 Finance direct system-to-system integration with the HMRC web service for submitting VAT returns for companies registered for VAT in the UK. This involves the adoption of an Electronic Invoicing service as an intermediary to facilitate secure access to the storage of credentials essential for software authorization within the HMRC APIs. These services will not be accessible from on-premises deployments of Dynamics 365 Finance.
After transitioning cloud-based customers to the new integration, the current access for on-premises customers will be discontinued.
Deprecation plan
In version 10.0.43 of Dynamics 365 Finance, we will introduce a new feature with enhanced security protections. In version 10.0.44 of Dynamics 365 Finance, this feature is enabled by default, and all environments will be transitioned automatically.
Starting June 6, 2025, we will discontinue support for the UK MTD VAT integration feature in on-premises deployments of Dynamics 365 Finance.
Recommended alternatives
Do you have on-premises deployments of Dynamics 365 Finance using current MTD direct system-to-system HMRC web services for VAT returns? Consider the following options to maintain compliance with HMRC’s VAT submission requirements.
Option I: Migrate to the cloud-based solution, Dynamics 365 online
Transitioning to the cloud deployment of Dynamics 365 Finance offers several advantages. These include enhanced security, automatic updates, and compliance with HMRC’s MTD requirements. This provides seamless integration and access to the latest Dynamics 365 Finance features.
Additionally, you can use a cloud-based environment as intermediary software for submitting your VAT return to HMRC from your on-premises deployment. To implement this solution, establish a cloud-based environment configured to interact seamlessly with your existing systems.
With adjustments to the UK MTD VAT Electronic Messaging, you can efficiently submit your VAT returns to HMRC using Dynamics 365 Finance’s cloud-based solution. This approach allows your organization to benefit from cloud capabilities such as more security options, improved data management, and staying updated with regulatory changes. We recommend this option to ensure compliance with HMRC’s VAT submission requirements.
For more information about how to adopt the UK MTD VAT Electronic Messaging to submit a VAT return, see Submit a VAT return to HMRC’s MTD web service – Finance | Dynamics 365 | Microsoft Learn.
Option II: Explore third-party software alternatives
Customers maintaining on-premises deployment should consider third-party software for VAT return submissions to HMRC. These solutions should meet your operational needs and compliance standards.
Review these options and act before on-premises VAT submission support is discontinued to avoid disruptions in compliance and VAT reporting.
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