VAT returns with periods starting from 1 April 2019 must be submitted using an application programming interface (“API”). From this date, the business must also hold transaction level data electronically in functional compatible software.
As the clients agent for submitting VAT returns, we can use the clients mainstream bookkeeping software which is VAT compliant with MTD. Alternatively, we can use an excel VAT tool that also complies if you’re bookkeeping is performed digitally via spreadsheets rather than a bookkeeping software.
As this has been ongoing for nearly a couple years, it has become the ‘norm’ for most of you and much of the stress involved in the changes made should hopefully be resolved.
However, HMRC continues to improve efficiencies and modernise the tax collection service for VAT (and many of the other taxes).
With this being said, VAT returns with periods from 1 April 2021 must be further complaint. Businesses must be able to demonstrate that an uninterrupted digital link exists between the filed VAT return and all systems that contain the digital records (I.e. the bookkeeping software or the excel workings). A digital link means there is no manual intervention (e.g. copy and pasting or typing from one spreadsheet to another) in the transfer of data between systems (ignoring certain specified exemptions).
Digital links include:
– 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 (e.g. pen drive) end physically giving to someone to import that data into their software.
– XML, CSV import and export, and download and upload of files. – Automated data transfer – API transfer
This list is not exhaustive.
The main reason for the new rule, logically, is that it suggests there are data errors being created at times of information transfer. Effectively, between the source data and the figures submitted to HMRC. In our opinion the change therefore should be welcomed amongst businesses to help avoid unnecessary errors which can create over/under claims resulting in potential penalties and tax investigations.
At Everyday Accountants we create and hold digital records and there should be no change in the method of our service delivery as we already comply with digital linking for our clients.
However, should you have any queries with the MTD requirements and would like some assistance, we will be happy to review your business’s VAT digital journey from source to submission.
Please see the governments website on making tax digital for further information:
https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital