Compliant software

Digital records can be maintained in more than one program or software product. Where records are maintained in more than one program or product there must be digital links between each of the software products/spreadsheets. Information cannot be transferred manually between products. Digital links have been defined and the following actions are included: 

  • emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation (for instance, a Partial Exemption calculation);
  • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to an agent to import that data into their software;
  • XML, CSV import and export, and download and upload of files; 
  • automated data transfer;
  • API transfer; or
  • linked cells within or between spreadsheets. The transfer of information by the use of copy and paste or cut and paste does not meet the requirement for a digital link 

Section 7 of the MTD for VAT notice includes a number of examples that illustrate the extent to which digital links are required.

For the first year, HMRC will not enforce the requirement to have digital links in place. This is to allow some more time for links between legacy systems to be made digital. During this period manual transfer of data between different systems is permitted but the final transfer of data into the MTD compliant software product from which the return is filed must be digital.

MTD for VAT functional compatible software must be able to:

  • Keep records in a digital form.
  • Preserve records in a digital form.
  • Create a VAT return from the digital records.
  • Provide HMRC with VAT returns and voluntary information by using the API (application program interface) platform.
  • Receive information from HMRC using the API platform. This will include messages about a requirement to file and confirmation of successful filing and will allow HMRC to send ‘nudge’ messages to the business/agent.

HMRC is working closely with software providers to ensure a range of suitable products will be available at a variety of price points.

The software required to submit VAT returns will depend on whether it is being used to record keep for VAT purposes, or submit a VAT return using bridging software.

Record Keeping software

All software used for record keeping must also allow you to submit your VAT return.

Although HMRC do not recommend any specific software provider, they have introduced a tool to assist in finding an HMRC approved software provider.

Most existing software providers will be MTD compatible, or in the process of becoming compatible, but the link can be used to confirm this.

https://www.tax.service.gov.uk/making-tax-digital-software

Below are links to compliant software that as a practice we are using and can recommend to our clients:

Prior to any purchase or upgrade to compatible software please do speak to us as we will be able to offer advice and may be able to arrange preferential rates.

Bridging software

Bridging software allows a business or individual to continue record keeping on spreadsheets and links these records digitally in order to comply with HMRC requirements.

The use of spreadsheets, either to record individual transactions or as part of a suite of software and spreadsheets is permitted, however

  • An existing spreadsheet alone is not a free way to comply with the MTD for VAT requirements as it will not have the functionality to file the return.
  • Spreadsheets will need to be either API enabled or, more likely, used in combination with a commercial MTD compatible software product so that data can be sent to and received from HMRC systems.

We have trialled a number of bridging software products and Vital Tax is both a simple and cost effective solution to digitally bridging spreadsheets to the MTD compliant VAT return.

https://vitaltax.uk/

This product is free for a year and only obtains a client’s email address on initial sign up.