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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 recordkeeping for transferring information from Excel spreadsheets and other data sources to their online VAT filing
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.
Now in light of the covid-19 pandemic, HMRC has extended the soft landing period.
The gov.uk pages are currently being updated, but the tax authority has already informed stakeholders and relevant bodies.
An HMRC spokesperson said: ‘We understand that the impact of Covid-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges.
‘Therefore, we are providing all MTD businesses with longer to put in place digital links between all parts of their functional compatible software.
‘This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.
‘Every business will still need to ensure they are keeping digital records, submitting VAT returns via an API enabled software and maintaining all digital links they may have in place already.
‘We encourage businesses to proceed with their new digital links procedures, or to complete or make plans to put digital links in place now, where that is possible.
‘This adjustment is intended to help those businesses who had still to incur cost or time putting full digital links in place, and where the impacts of the Covid-19 pandemic on their business now makes that particularly difficult.’
HMRC’s announcement was welcomed by CIOT which had lobbied the Treasury to put the digital link requirement on ice as part of a package of suggested easements to help businesses cope during the pandemic.
Tina Riches, chair of the joint CIOT and ATT digitalisation and agent services committee, said: ‘Many businesses are working hard simply to survive these unprecedented times. We know that some businesses, particularly those with legacy or complex systems, were struggling to meet the deadline for this requirement.
‘This announcement helps those businesses focus on doing the business they can and managing the Covid-19 challenges, rather than dealing with changes to how they keep their business records.’
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