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What do I need to know about digital links?   

HMRC is keen to ensure there is an end-to-end digital trail, or digital links, from source system to submission of VAT returns. This is regardless of whether the information is prepared using a tax compliance software or spreadsheet.

Whilst tax compliance software may provide a digital links friendly environment, many businesses may decide to improve their existing spreadsheet environment to comply with MTDfV legislation. The digital links requirements include the following conditions:

  • No copying and pasting data between sources of data. VAT returns preparation should be automated as far as possible, which could be by spreadsheet formulas and macros, but may be complicated if you are managing a sizeable number of data sources.
  • No manual re-keying of data during the VAT returns preparation process. Businesses will be required to demonstrate digital trail of information from submission back to source systems.
  • VAT return adjustments will be allowed provided they are recorded and there is a digital trail of changes so no manual inputting or copying and pasting of hard data is present within workings e.g. inserting partial exemption adjustments.

October 2019 Update - Digital links deadline extensions:

HMRC has announced that certain businesses with complex or legacy IT systems may apply for additional time to put the required digital links in place. Details on the criteria to be considered for an extension are set out in Notice 700/22, paragraph 4.2.1.3. HMRC expect applications only to be made in exceptional cases.

While awaiting a decision from HMRC, businesses should ensure they progress their plans to comply with MTDfV.

Applying for an extension

  • The formal application to HMRC has to be made as soon as possible and by no later than the end of the “soft landing period” (i.e. April or October 2020).
  • You may refer to Notice 700/22, paragraph 4.2.1.3 (‘How to apply’), for details on how to apply for an extension.
  • All applications will be considered on a case-by-case basis.

Key points

  • Applicants will have to explain why they cannot meet all their digital links obligations in the current 1-year soft-landing period, and set out their plans for compliance in detail.
  • The plans shall include an explanation and timetable for when and how the business will become fully MTDfV compliant, and controls that will be put in place to ensure manually transferred data is moved without error.
  • Applicants will also have to provide details of the systems that are unable to be digitally linked.
  • Cost alone is not sufficient reason for HMRC to issue a specific direction to extend the deadline. Applications will be considered on a case-by-case basis. The business is expected to make every effort to comply with the MTD requirements by the end of the soft landing period.

How can we help?

Get data right the first time:

We have a number of solutions that can help get your data right first time, every time. These include:

  • Automated ERP reviews to get tax data right at source
  • Machine learning classification tools to ensure the correctness of master data within your ERP
  • Data wrangling tools to extract the right data in the right format for vat return preparation
Get data in the right shape:

We have some great tools to extract, consolidate and format data from your source system to feed your compliance process in an MTDfV friendly manner. These include:

  • Data collation tools which assist in formatting and verifying extracted data
  • Data cleansing tools
  • Automated spreadsheets
Automate the calculation:

We have teams expert in:

  • Improving your existing spreadsheet environment
  • Deploying 3rd party and Deloitte tax technology software to streamline your compliance process including PXS calculations.
It is important to choose the right option for you – we are able to provide impartial advice and support through training and review to help find the perfect fit for your business.
Submit digitally:

Deloitte’s market leading compliance platform, myInsight, hosts our indirect tax compliance software (ITC). ITC provides a flexible, scalable, cloud based approach to preparing and submitting your returns. The system is set up to handle the shift towards real time reporting, not only in the UK but globally. This platform will allow you to import, review and submit your return at the click of a button as well as managing all past and future obligations. Find further information on Deloitte’s ITC software.

You can also download our MTDfV Digital Links flyer.
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