In light of the ongoing pressures of COVID-19, HMRC are today announcing the extension of the Making Tax Digital (‘MTD’) for VAT soft-landing period for integrating ‘digital links’.

Whilst ‘digital links’ have always been part of the MTD legislation, HMRC had included a soft-landing period to allow businesses time to develop and implement full ‘digital journeys’ within their accounting systems which was due to end for the next VAT period starting on or after 1 April 2020 for most businesses. During this soft-landing period businesses could still transfer VAT data from one piece of software to another using manual intervention (copy and paste or manual transposition).

For businesses who were mandated to file MTD compliant VAT returns from 1 April 2019, the soft-landing period has now been extended by 12 months so that businesses have until 1 April 2021 to ensure their systems comply with the ‘digital link’ requirements. Complex businesses that were only mandated to submit MTD VAT returns from 1 October 2019, already had an extended deadline of 1 October 2020 but will now benefit from at least a further 6 months postponement.

Whilst the delay does not remove the digital links requirement from the regulations altogether, the extension is a welcome relief to businesses who have struggled to integrate incompatible or legacy pieces of software.

What is a ‘digital link’?

A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications. That is without the involvement or need for manual intervention such as the copying over of information by hand or the manual transposition of data between two or more pieces of software.

HMRC accepts the following list (not exhaustive) as digital links;

  • linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.
  • emailing a spreadsheet containing digital records so the information can be imported into another software product
  • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to someone else who then imports that data into their software
  • XML, CSV import and export, and download and upload of files
  • automated data or API transfer

HMRC does not consider the use of ‘cut and paste’ or ‘copy and paste’ to select and move information, either within a software program or between software programs, to be a digital link.

If you need help to assess your accounting systems and ‘digital links’ or you require any further information, please do not hesitate to contact me or your local Thomas Westcott office.

By Accounts Manager, Stuart Pedlar