Businesses participating in Making Tax Digital (MTD) for VAT are required to have ‘digital links’ in their record-keeping from 1 April 2021.

Under the original guidelines, participants of MTD were given a year from the launch of the scheme to have digital links in place between all parts of their functional compatible software. Many businesses were working to a deadline of either 1 April or 1 October 2020, depending on their original MTD start date.

All businesses must now have digital links in place between software programs, by their first VAT return period starting on or after 1 April 2021.

What is a MTD digital link?

A digital link enables the transfer, recapture or modification of data to happen electronically between software programs, products or applications. Essentially, each piece of software must be digitally linked to each other to create the digital journey.

Therefore, manually transferring data within or between different parts of a set of software programs, products or applications is not acceptable under MTD.

For the link functionality to comply with MTD, there should be no manual intervention required in the transfer of data.

Examples of digital links include

Transfer or exchange of data within a business (for example between two systems); and

Transfer of data to a tax agent in order that they can prepare a VAT return or make a calculation.

HMRC also accepts that the following are digital links (this list is not exhaustive)

  • 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; and
  • 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.

Should you have any queries on the above or require any advice or support then please either get in touch with your usual M+A Partners contact or email and we will be happy to help.