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Making Tax Digital for VAT – changes from April 2021

Posted on 11th March 2021 - Making Tax Digital

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When MTD for VAT came into effect in April 2019, it introduced the requirement for VAT registered businesses with a turnover above the VAT threshold to keep the records in a digital format and submit their VAT returns via software.

The digital records requirement included the need for a complete digital journey from records to submission of the VAT return, with a few exemptions where manual adjustments were allowed.

The intention of this digital journey was to reduce the errors in the VAT return which could arise from manually re-entry of figures.

In certain circumstances the digital journey caused some technical and practical issues, particularly where the digital records were kept in multiple pieces of software. To allow time for these issues to be resolved HMRC set out an initial 12 month soft-landing period for some of these digital links between software, after which these digital links become mandatory. The soft-landing period was then extended through to April 2021.

The digital links mandate has a number of implications for businesses as follows:

  1. Cut or copy and paste will no longer be allowed – which means any business manually transposing data will have broken the digital journey and be deemed non-compliant.
  2. Spreadsheets must have a digital link – so that cells between different worksheets or workbooks are linked. Any formula errors or broken macros will break the link.
  3. Compiling the information from different software sources into the VAT return will now need to be done exclusively via digital links – an export from software into a spreadsheet will be acceptable.
  4. Any audited business must be able to evidence their compliance from source to report.

Please note that from April 2022 the MTD for VAT regime will be expanded to include all VAT registered businesses, with Income tax due to follow in April 2023.

If you have any queries or concerns about this next step of MTD for VAT and how it applies to your own VAT compliance procedures then please email or call your usual Streets contact or email

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