Soft-landing Period is now fast approaching for Making Tax Digital

Soft-landing Period is now fast approaching

With the introduction of Making Tax Digital (MTD) for VAT in 2019, HMRC also introduced a “soft-land period” for businesses to have in place digital links between all parts of their functional compatible software. As per this soft-landing period, businesses would not be required to have digital links between software programs until their first VAT return period starting on or after 1 April 2021.

During the soft-landing period only, where a digital link was not established between software programs, HMRC would accept the use of “copy and paste” or “cut and paste” as being a link for these VAT periods.

As the soft-landing period is now fast approaching and this copy/cut and paste process will no longer be an option, digital links should be used between all parts of the business’ functional compatible software. So, what is a digital link?

HMRC provides the following definition and examples for MTD:

A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications. That is without the involvement or need for manual intervention such as the copying over of information by hand or the manual transposition of data between 2 or more pieces of software. This could be a transfer or exchange of data within a business (for example, between 2 systems) or a transfer of data to a tax agent in order that they can prepare a VAT Return or make a calculation (for example, a Partial Exemption calculation).

A digital link includes linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.

HMRC also accepts that the following are digital links:

  • 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

This list is not exhaustive.

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