Our website uses cookies to enhance the visitor experience (what's a cookieCookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.). Are you happy for us to use cookies during your visits?
Please note: continuing without making a choice equates to giving us your consent, which you can withdraw at any time via our cookies policy page.

MTD for VAT: Second phase delayed

Newsletter issue - May 2020.

HMRC have announced the postponement of phase two of their Making Tax Digital (MTD) for VAT project.

This 'phase two' required businesses to digitally link their software all the way from entry of each transaction at one end of the process through to submission of the VAT return at the other, irrespective of how many pieces of software were used.

This means the rules on maintaining digital links from original transaction to tax return will not be enforced until 1 April 2021.

Businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place. HMRC have updated VAT Notice 700/22 Making Tax Digital to reflect this extension.

Digital links summary

MTD requires businesses to maintain relevant information about sales and purchases in an electronic format, using 'functional compatible software'. This means a software programme which allows information to be recorded in an electronic form which sends and receives information to/from HMRC using the API platform (including API-enabled spreadsheets). It is possible to use more than one software programme but there must be a digital link between them.

Broadly, the functions of the compatible software must include:

  • keeping records in a digital form as required by regulations;
  • preserving digital records in a digital form as required by regulations;
  • creating a VAT return from the digital records held in functional compatible software and providing HMRC with this information digitally;
  • providing HMRC with VAT data on a voluntary basis;
  • receiving information from HMRC via the API platform in relation to a relevant entity's compliance with obligations under the regulations.

Digital records can be kept in a range of compatible digital formats. They do not all have to be held in the same place or on one piece of software. For example, a spreadsheet can be a component of digital record keeping provided the product that consolidates records, or summary records from the spreadsheet, can exchange data digitally with HMRC.

Newsletter SubscriptionPlease enter your details

Book a Free, No Obligation Consultation

Take advantage of a free consultation to see how you can benefit from using Stanhope accountancy and advisory and find out the best way to deal with your tax, accounting and how to minimise your tax liabilities. Book now >

Get a Fixed Quote

We believe you should always be in control of your finances. For this reason we can offer many of our services on a fixed fee basis on agreed services >

Profitability Strategies

We can help you develop strategies to help your business grow without increasing costs specialized tax incentives to produce multiple benefits and help you increase your profit >

Your Business

Expert tax planning advice any size business tailored to you >