HMRC reveals digital links, must-have records and more, among plethora of new details on MTD
HMRC has released a huge amount of new information on Making Tax Digital for accountants to absorb.
On Friday 13th, officials published a news release, with a triple whammy of documents for professionals to get their heads around.
• A new HMRC VAT Notice.
• A list of software developers HMRC is working with during the MTD VAT pilot – including IRIS
• A communications pack for accountants to use when educating clients about MTD.
There was a large amount of detail, which will take time to soak up fully.
Must-have digital records
HMRC has listed records that must be kept digitally when MTD takes effect. It stated that you must have a digital record of:
• your business name
• the address of your principal place of business
• your VAT registration number
• any VAT accounting schemes that you use
The papers also said: “You will need to keep additional records, such as invoices. You do not have to keep these digitally but you may choose to do so.”
It also outlined that for each supply you make you must record the:
• time of supply (tax point)
• value of the supply (net value excluding VAT)
• rate of VAT charged
The document stated: “This only includes supplies recorded as part of your VAT Return. Supplies that do not go on the VAT Return do not need to be recorded in functional compatible software. For example, intra-group supplies for a VAT group are not covered by these rules.”
HMRC introduces ‘digital links’
Another important section of the document was the introduction and definition of ‘digital links’. This is HMRC’s explanation:
“Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.
“A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications. That is without the involvement or need for manual intervention such as the copying over of information by hand or the manual transposition of data between 2 or more pieces of software.”
What counts as a ‘digital link’?
According to HMRC, it can NOT be:
• ‘Cut and paste’ to select and move information, either within a software program or between software programs.
It can include:
• linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.
• 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
The document stressed that the list is “not exhaustive”.
A lot of reading lies ahead for accountants as you pore over and digest the details.
Meanwhile, IRIS can help you to meet your MTD needs with our solutions. We also have an array of knowledge and resources for you. Click here to see more.