HMRC has deferred, by one year, the deadline for businesses reporting under Making Tax Digital (MTD) for VAT to meet the requirement to have ‘digital links’ within their record keeping for transferring information from Excel spreadsheets and other data sources to their online VAT filing.
The deferment is intended to help those businesses that still had to incur cost or time putting full digital links in place and where the impact of the Covid-19 pandemic on their business would mean this was less of a priority or an unwanted burden.
Businesses will now be able to continue using their current ad hoc systems based on in-house Excel exports until the new tax year on 1 April 2021. The original MTD for VAT guidance defined a digital link as an electronic or digital transfer, or exchange of data, between software programs, products or applications.
It specifically excluded the use of ‘cut and paste’ or ‘copy and paste’ as a way of transferring information, with the exception of during the first year of operation when having digital links was not made mandatory.
HMRC offered a soft landing period when businesses could make a manual transfer. This was set to end on either 1 April 2020 or 1 October 2020 depending on when the business first registered for MTD for VAT. In light of the Covid-19 pandemic, HMRC has extended the soft landing period until 1 April 2021.
Businesses will still need to ensure they are keeping digital records, submitting VAT returns via API enabled software and maintaining all digital links they may have in place already.
It is however, recommended that VAT registered businesses continue with plans to move to new digital links procedures, or to complete or make plans to put digital links in place now, where it is possible.