Consider this a beginner’s guide to understanding MTD digital links and why they matter to your business. If you’re a large UK company with your own finance team, then you may be all set for Making Tax Digital and remaining compliant but if you’re a small business with an outsourced accounting function, you need to pay attention because this is not something your accountant will be able to help you with. This is what’s important to know about MTD digital links so that you can ensure you are compliant:
MTD digital Links will matter from January 2021
It’s worth noting that recently HMRC postponed the launch of MTD phase II to April 2021. Originally, it was supposed to be implemented from April 2020 but due to COVID-19 and it’s havoc-wreaking on businesses across the UK, HMRC postponed the rollout.
This means you have until your first VAT return period starting on or after 1 April 2021 to put those digital links in place.
How to Put Digital Links in Place for MTD
The bottom line of MTD is that VAT return data must be filed digitally. This means that your software must be capable of providing information to HMRC and receiving information from HMRC digitally. You may also want to consider using bridging software that connects your ERP/accounting system to HMRC. This is because not all accounting software will have digital links in place to do this directly and compliantly. Bridging software is useful because it will perform automated compliance checks. This will ensure your VAT calculations are accurate before you file them digitally.
How to Combine Digital Links and Spreadsheets
You will still be able to run your business using spreadsheets. HMRC have acknowledged that it will be too difficult to expect businesses to move everything off spreadsheets. Therefore, they have made provisions for linking spreadsheets digitally. For example, Excel can still be used for calculations as long as bridging software or API-enabled spreadsheets are used for a digital submission to HMRC.
What Happens if I Don’t use Digital Links?
Failure to meet MTD requirements will result in businesses accruing ‘points’ with HMRC (but not the good kind). A build-up of these points will result in financial penalties. Don’t panic though. There will be a grace period for phase II for those who still need to get to grips with their new software and structures.
Vatglobal and MTD
We have built technology to help your business ease into MTD phase II (or I if you haven’t yet) without a hitch. vfile is seamless bridging software with an API to all ERP systems and will ensure that you remain 100% compliant on your digital transformation journey.