As you are hopefully aware, the end of the soft landing period for Making Tax Digital (MTD) is drawing closer and for any VAT periods starting on or after 1 April 2021 MTD registered businesses will need to be compliant with the full MTD regulations surrounding digital record keeping and digital links.

There are two main areas which will change from 01 April 2021:

  • Digital record-keeping – Obliging the maintenance of key VAT transactional data in digital form.
  • Digital links – Requiring the transfer of digital data between software programs or applications by digital means. The digital journey must be uninterrupted, without manual transfers or adjustments.

These changes apply to all businesses that are over the registration threshold for VAT (£85,000). If you fall over the registration threshold you should already be filing through the MTD filing portal – either using compatible software or bridging software.

Voluntarily registered businesses will have until 1 April 2022 to register for MTD and be and fully compliant with the digital record keeping and digitally linked software requirements. The legacy government gateway system remains an option for these companies.

HMRC have confirmed that there will be no further extensions granted on the deadline and that penalties will be forthcoming for non-compliance.

What's a Digital Link?

Very simply put a digital link is the automated transfer of data or integration. This includes API transfer, CSV export/import of data or the linking of cells in excel.

HMRC have said manually transferring information from non-digital records into an excel spreadsheet or accounting system, the 'cut and paste' to select and move information or manual adjustments or consolidations to VAT returns outside of the accounting system will no longer be permitted.

For more information on digital links, please follow this link and navigate to section 4.2.1.

We have created a handy MTD guide you can download for free to give you the information you need in preparation for April.

Free Making Tax Digital (MTD) guide

You can download your copy of our free handy guide to MTD here:

Download now

Originally published 24 March 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.