Digital links. Making Tax Digital for VAT (MTDfV) is about keeping particular VAT records in digital form, then sending your VAT return information to HMRC digitally. But if your digital records aren’t all in one place, or one program, they will involve points of data transfer/exchange between different bits of software. The points where that transfer or exchange take place are called digital links.
What’s changing? HMRC wants a digital trail using links from your accounting systems all the way to the figures on your VAT return. In other words, any transfer of information between software programs, applications or products that make up part of your records has to be electronic/digital.
Legal requirement. Although required by law, HMRC hasn’t insisted on digital links for the first year of MTDfV. Thereafter, subject to very specific exceptions, no manual links will be permitted and HMRC will enforce this with penalties if necessary (see The next step ).
When? The new linking rules will apply from the first anniversary of when you were required to use MTDfV. For example, if your first MTDfV return was for the quarter beginning on 1 April 2019, the date is 1 April 2020. Tip. If your affairs are really complicated, you can ask HMRC for an extension (see The next step ).
What will be allowed? The following count as digital links: linked cells in spreadsheets; e-mailing a spreadsheet with digital records so the information can be imported into another software product; transferring digital records onto a pen drive or memory stick to give to someone else, e.g. your accountant, so they can import the data into their software. You’re also OK with XML, CSV import and export; download and upload of files; automated data transfer and API transfer. Cut or copy and paste will no longer be allowed as legitimate digital links.