Making Tax Digital ‘digital links’ requirement delayed

In response to the COVID-19 crisis, HMRC has confirmed that any businesses undertaking Making Tax Digital (MTD) for VAT now have an extension to 1 April 2021 (previous deadline 1 April or 1 October 2020) to meet the ‘digital links’ requirement related to their recordkeeping systems.

To be MTD for VAT compliant, the digital links requirement will see businesses move their system to ‘functional compatible software’. For clarity, a digital link is when the VAT data required for MTD is transferred between two digital places such as software or computer devices, for example when a business digitally transfers VAT data to their accountant in order for exemptions to be calculated. It also occurs when a business retains transactions with a spreadsheet and uses a formula to calculate a total. However, HMRC does have two strict rules on what defines a digital link for HMRC, that is:

  1. Data is transferred electronically between software programmes, products or applications – linked cells in a spreadsheet or a formula.
  2. The transfer is automated – it doesn’t need manual intervention such as copying data by hand, but a click of a button is considered a digital process.

HMRC also accepts less obvious digital links including:

  • Emailing a spreadsheet so it can be imported into software.
  • Using a memory stick or pen drive.
  • Import and export including downloading and uploading of files.
  • API transfer.

If you have a query about Making Tax Digital, contact our team today at MTD@chiene.co.uk.