VAT Making Tax Digital Changes 1st April 2020

By Chris Dawson March 12, 2020 - 2:42 pm

From the 1st of April 2020, the so called ‘soft landing’ period for VAT Making Tax Digital ends and you will need to have fully digital records and VAT return submission to HMRC in place. The reason this is important is you could incur penalties for failure to comply with VAT Making Tax Digital.

Since last year, HMRC have allowed a period of time for businesses to have in place digital links between all parts of their functional compatible software. During this first year most businesses were not be required to have digital links between software programs but this ends for most people on the 1st of April, for everyone else the date will be the 1st of October.

Cut and paste will no longer be allowed and it is likely you will need some expertise with spreadsheets to connect your marketplace sales records with your spreadsheet along with bridging software to upload to HMRC, or an accounts package. On the plus side, VAT Making Tax Digital means you’ll no longer have to do manual calculations as your spreadsheet or software should do this for you.

What are the new VAT Making Tax Digital Change rules from 1st April 2020?

If a set of software programs, products or applications are used as functional compatible software there must be a digital link between these pieces of software.

VAT Making Tax Digital Changes soft landing end dates

  • VAT period starting on or after 1 April 2019 – you will have until your first VAT return period starting on or after 1 April 2020 to put digital links in place.
  • VAT period starting on or after 1 October 2019 – you will have until your first VAT return period starting on or after 1 October 2020 to put digital links in place.

What are digital links for VAT Making Tax Digital?

  • A digital link is an electronic or digital transfer, or exchange of data, between software programs, products or applications.
  • The use of ‘cut and paste’ or ‘copy and paste’ does not constitute a digital link

What constitutes a digital link for VAT Making Tax Digital?

  • 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 transfer
  • API transfer

What can you no longer do?

  • Manual adjustments in spreadsheets
  • Cut and paste within spreadsheets, a software program, or between software programs
  • Barry S.
    2 years ago

    Isn’t MTD coming in for everyone below the VAT threshold in the next tax year?

    There seems to be very little information to be found about this. There will be many businesses earning below VAT threshold (mainly self-employed people) who could be caught out by this.

    AFAIK It does not affect those whose annual turnover is below £10,000, or the “digitally excluded” or those who can’t use the software for religious reasons or have disabilities etc.

    Can we please have some more information about this? I have been stressed about whether I need the software or not, but 99% of the information I can find is about VAT registered businesses.

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