MTD for VAT soft landing period

What is a digital link?

Once transactional data is entered into a software package, any further transfer or modification of that data must be done without manual intervention. This means that, if the data needs to be transferred to a different software package, it has to be done without copying/pasting or retyping. The software used must be linked digitally. This applies to transferring of data between, for example, bookkeeping software and a spreadsheet. HMRC effectively requires a digital audit trail from the source accounting system through to submission of the VAT return. Only certain adjustments, such as for partial exemption and margin schemes are permitted outside the digital framework.

What HMRC considers a digital link is surprisingly inclusive.

Examples of digital links accepted by HMRC are:

• Emailing a spreadsheet for information to 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;
• API (Application Programming Interface) transfer – this is the technology used for systems to directly link and transfer data.

What if you use more than one piece of software?

In theory, MTD for VAT requirements can be met by using a number of software packages, including spreadsheets, provided they are digitally linked. Therefore, for example, a business could record sales and purchases in a bookkeeping package and transfer the figures to a spreadsheet that calculates the figures for the nine VAT return boxes before sending the information to bridging software to submit to HMRC via the approved API software.

Is TaxCalc’s VAT Filer compliant?

Even after the ‘soft landing period’ has ended, our VAT Filer bridging software meets HMRC’s requirements for being listed on its software supplier list and continues to be compliant. VAT Filer provides an incoming digital link, by allowing businesses to import data held in a spreadsheet into the nine VAT Return boxes. From there, the information is sent digitally, via APIs, to HMRC’s MTD system. TaxCalc also provides for the ability for post-import adjustments to cater for items such as partial exemption and the margin scheme.