The requirement to submit VAT returns to HMRC using Making Tax Digital (MTD) compatible software became mandatory in 2019. For most VAT registered entities, this took effect from the first VAT return period beginning on or after 1 April 2019.
From April 2019 once those mandated to comply with VAT MTD entered accounting data into their business’s accounting software they have been required to transfer, recapture or modify that data using digital links. HMRC initially granted a 12 month soft landing period to allow businesses time to ensure a clear digital audit trail was in place throughout their VAT accounting systems. This was due to come to an end on 1 April 2020.
HMRC has postponed plans to require businesses to maintain end-to-end dynamic data in VAT records due to the coronavirus (Covid-19) crisis. HMRC stated in an email sent to selected stakeholders as follows: ‘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.’
This postponement of the MTD digital links requirement is very useful, if not vital for some businesses in difficulty as it gives them more time to consider their choices and implement the right solution in light of the challenges coronavirus is creating.
Combined with the recent VAT payment deferral, it is obvious that HMRC are trying to help businesses with their VAT compliance obligations as much as possible during these extremely challenging times.
