Making Tax Digital - HMRC confirms 'cut and paste' first year soft landing option - Azzure IT
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Making Tax Digital – HMRC confirms ‘cut and paste’ first year soft landing option


Further information released to the provisions of The Value Added Tax (Amendment) Regulations 2018 (SI 2018 No. 261), by HMRC, on their VAT Notice 700/22: Making Tax Digital for VAT, has clarified the digital requirements.

Soft Landing period

Depending on the classification of the business, a one-year soft landing period, lasting until at least April 2020, will be in place. Which means that businesses will for the first year of mandation not be required to have digital links between software programs, as such HMRC will accept the use of ‘Cut and paste’ as being the digital link for these VAT periods.

This period of grace will give business the time to implement true digital connections between the relevant parts of their financial software solutions.

In terms of timing and compliance with digital link rules (discussed below), compulsory reporting will first apply to the company from either the:

  • VAT period starting on or after 1 April 2019, so the company will have until their first VAT return period starting on or after 1 April 2020 to put digital links in place; or
  • VAT period starting on or after 1 October 2019, the company will have until their first VAT return period starting on or after 1 October 2020 to put digital links in place.

Regardless of how the VAT data is transmitted to HMRC, companies will be able to use bridging software as long as the final records are submitted in the correct digital link format.

An HMRC spokesperson told Accountancy Daily: ‘Bridging software takes information from other applications, for example, a spreadsheet or an in-house record keeping system, and lets the user send the required information digitally to HMRC in the correct format. The soft landing until April 2020 relates to digital links between systems that make up the VAT return.’

Mandated businesses still have to file via functional compatible software from April using an API (including API enabled spreadsheets). However, if a business, say, has two offices using different software, they can transfer that data manually between them and HMRC in the first year – it does not have to be seamless while they transfer to the new system.’

Digital Links vs. ‘Cut and Paste

The meaning of a digital link has force of law, defined as a ‘digital link is an electronic or digital transfer, or exchange of data, between software programs, products or applications’. This will include situations where, for example, a spreadsheets cell’s individual formula mirrors the source’s value in another cell – the cells are linked.

HMRC will also accept the following as ‘digital links’:

  • 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),
  • API transfer or automated data transfer,
  • 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.

However, HMRC will not allow the use of ‘cut and paste’ as this does not constitute a digital link, except for during the soft landing period as set out in HMRC guidance, paragraph 3 of the next ‘force of law’.

If you have any questions regarding how you can Make Tax Digital, please don’t hesitate to contact your Account Manager or a member of our Sales Team: to discuss the Microsoft Dynamics options

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