Additional Making Tax Digital for VAT (MTD) requirements will take effect from Thursday 1 April 2021. When HMRC first announced MTD, it was a two-phase process.
This alert focuses on the important aspects and changes to MTD which organisations need to be compliant with for the imminent end to the ‘soft landing’ period.
The second phase of MTD is more challenging for organisations. Under phase one it was just the submissions which were required to be digital, whereas phase 2 will require businesses that use different pieces of software to have ‘digital links’ between them. A ‘digital link’ is a transfer or exchange of data that can be made electronically between software programs, products or applications without the involvement or need for manual intervention.
For phase two compliance HMRC will now require automated digital links between any software program, product or application used in the process of preparing a VAT return. This does mean that there will need to be a digital link from when a transaction is first recorded on a digital format all the way to the digital submission of the VAT return figures to HMRC i.e. can the business establish a clear digital journey from data source to VAT return submission.
Copy and pasting data and any manual typing of data other than the original creation of records will not be considered to be digital links for MTD purposes.
Provided the data within it has been obtained via an automated process, emailing a spreadsheet to an outsourced VAT compliance provider will be acceptable under phase two. This will be a relief for those whose VAT advisors and accountants prepare their VAT returns. HMRC also accepts transferring digital records on a portable device such as a flash drive, CSV and XML downloads as well as API transfers.
If you aren’t sure that your processes are MTD compliant then now is the time to check. Our team has experience of reviewing VAT return processes to identify any gaps and providing practical, cost-effective solutions to be fully compliant with the new rules. Please get in touch with Rob Marchant, or usual VAT contact to discuss your MTD compliance in greater detail.
Monday 22 February 2021 | 14:30 - 15:30
Our VAT specialists will be covering all the important information to make sure you're prepared for the MTD 'hard landing' period. You'll also be able to take part in a live Q&A.
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