Share your experiences of digital links and MTD for VAT

11 January: The requirement for digital links within MTD for VAT software starts in April 2021, following the end of the soft-landing period. ICAEW’s Tax Faculty is urging HMRC to provide more guidance and is asking for examples of difficulties faced in implementing the requirement.

HMRC’s current guidance on the requirement for digital links within a set of software products maintaining digital records, is contained in the MTD for VAT notice at sections 4.2.1 and 8.

The basic rule is that it is unacceptable to transfer data manually within or between different parts of a set of software programs, products or applications that make up functional, MTD-compatible software.

Understanding and implementing this requirement in practice is not always straightforward.

ICAEW and other professional bodies have asked HMRC to develop further guidance on this requirement, including clarification of:

• What is meant by a digital link, developing HMRC’s non-exhaustive list of:
  o emailing a spreadsheet containing digital records so the information can be imported into another software product;
  o transferring a set of digital records onto a portable device  and giving this to someone else who then imports that data into their software;
  o XML, CSV import and export, and download and upload of files;
  o automated data transfer; and
  o API transfer.
• Where a digital link is required and where it is not

To support the request for further guidance, the Tax Faculty would welcome examples of where the requirement for digital links is causing difficulty.

The faculty is particularly interested in hearing examples of where it is difficult to understand or interpret the requirements in practice from HMRC’s current guidance.

Please email any examples to caroline.miskin@icaew.com. These will be forwarded to HMRC for it to consider when developing further guidance.

• For more on MTD, visit icaew.com/MTD