UK – HMRC announces deferment of digital links until 2021

HMRC has today made the following announcement to stakeholders: “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 more time 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.”

The digital links requirement of Making Tax Digital (MTD) has been operating within a “soft landing period”, allowing businesses to continue to use ‘cut and paste’ or ‘copy and paste’ within their VAT return preparation process. It was expected that from 1 April 2020 all VAT registered businesses would have been required to implement and maintain a clear digital ‘journey’ or ‘digital links’ to support VAT accounting transactions.

The requirement was for data transfer or exchange within and between software programs, applications or products that make up functional compatible software to be “digital” where the information continues to form part of the digital records. Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.

The soft-landing period had been granted to all VAT registered tax payers depending on when they were required to submit via MTD. Taxpayers mandated from a VAT period starting on or after 1 April 2019 had until the first VAT return period starting on or after 1 April 2020. However, Taxpayers within the deferred group – who were required to submit from the first VAT period starting on or after 1 October 2019 – had until their first VAT return period starting on or after 1 October 2020 to put digital links in place. As the requirement for having digital links has now been deferred until 1 April 2021, taxpayers will no longer have to implement or maintain these digital links and may continue to use ‘cut and paste’ or ‘copy and paste’ to prepare VAT returns.

Source: Grant Thornton

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