MTD Soft Landing Period Comes To An End

Making Tax Digital (MTD) for VAT became mandatory for all businesses, with a taxable turnover above the VAT registration threshold of £85,000 nearly two years ago, with effect from 1 April 2019. Most companies should now be familiar with MTD filings process.

With the approaching new financial year 2021, we come to the end of the “soft landing period” for “digital links” which was extended by a year to ease the stress on businesses due to the pandemic.

Thus, for VAT periods starting on or after 1 April 2021 your systems must use digital links for any transfer or exchange of data between software programs or applications used as functional compatible software for MTD.

Quick Recap

Under MTD, once data has been entered into the software that you use to keep and maintain digital records, any further transfer, recapture or modification of that data must be made using “digital links”. This means when using more than one program, each software should be digitally linked to one another (i.e. the two software programmes should “talk” to one another. Hand typed numbers and copy-pasted spreadsheets are examples of processes which would not be acceptable here).

However, HMRC allowed a soft landing period of one year; extended by another year due to the pandemic; where businesses were not required to have digital links between software programs. HMRC accepted the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link in the soft landing period only.

Going forward

From 1 April 2021, all data transfer or exchange within and between software programs, applications or products that make up your functional compatible software must be digital, i.e. each piece of software must be digitally linked to other pieces of software to create the digital trail.

Manual transfer of data within or between different parts of the software programs (which includes ‘cut and paste’ or ‘copy and paste’) is no longer acceptable under MTD.

HMRC will accept the following (not exhaustive) list as digital links:

  • linked cells in spreadsheets;
  • emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation;
  • transferring a set of digital records onto a portable device, example a pen drive and physically giving this to an agent to import that data into their software;
  • XML, CSV import and export, and download and upload of files;
  • automated data transfer;
  • API transfer.

We hope you find the above information helpful. If you would like to discuss any queries you can contact the Elman Wall Tax team at 020 7600 5667 or email Lerona Waskar at lerona.waskar@elmanwall.co.uk

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