Making Tax Digital for VAT – are you ready for the next step?

Making Tax Digital for VAT became compulsory in April 2019 which means another important digital deadline is looming, but what is it?

digital links in Making Tax Digital - Making Tax Digital logo

Making Tax Digital for VAT (MTDfV) is about particular VAT records in digital form, then sending your VAT return information to HMRC digitally. But if you digital records aren’t all in one place, or one program, they will involve points of data transfer/exchange between different bits of software. The points where that transfer of exchanges take place are called ‘digital links’.

Digital Links

HMRC wants a digital trail using links from your accounting systems all the way to the figures on your VAT return. In other words, any transfer of information between software programs, applications or products that make up part of your records has to be electronic/digital.

Although required by law, HMRC hasn’t insisted on digital links for the first year of MTDfV. Thereafter, subject to very specific exceptions, no manual links will be permitted and HMRC will enforce this with penalties.

The new linking rules will apply from the first anniversary of when you were required to use MTDfV. For example, if your first MTDfV return was for the quarter beginning 1 April 2019, the dates is 1 April 2020. 

The following count as digital links:

  • Linked cells in spreadsheets
  • Emailing a spreadsheet with digital records so the information can be imported into another software product
  • Transferring digital records onto a pen drive or memory stick to give to some else e.g. your accountant, so they can import the data into their software

You are also ok with XML, CSV import and export, download and upload of files, automated data transfer and API transfer. Cut or copy and past will no longer be allowed as legitimate digital links.

Confused about Making Tax Digital for VAT? We can help. Get in touch with our team and we’ll give you the advice you need.

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