Digital links deadline extended to 1 April 2021

The deadline for implementing digital links for making tax digital for VAT has been extended by a year. 

An HMRC spokesperson said: ‘We understand that the impact of Covid-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges. Therefore, we are providing all MTD businesses with longer to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.

‘Every business will still need to ensure they are keeping digital records, submitting VAT returns via an API enabled software and maintaining all digital links they may have in place already. 

‘We encourage businesses to proceed with their new digital links procedures, or to complete or make plans to put digital links in place now, where that is possible. This adjustment is intended to help those businesses who had still to incur cost or time putting full digital links in place, and where the impacts of the Covid-19 pandemic on their business now makes that particularly difficult.’

The Chartered Institute of Taxation welcomed the deferral, saying this was among the suggestions it had made to government to help businesses cope during the crisis.  

Tina Riches, chair of the joint CIOT and Association of Taxation Technicians digitalisation and agent services committee, said: ‘Many businesses are working hard simply to survive these unprecedented times. We know that some businesses, particularly those with legacy or complex systems, were struggling to meet the deadline for this requirement. This announcement helps them focus on doing the business they can and managing the Covid-19 challenges, rather than dealing with changes to how they keep their business records.’

She explained that while phase one of the MTD for VAT requirements required businesses to sign up to the new system and submit their VAT returns to HMRC directly from their software, the second phase required businesses to link their software digitally all the way from entry of each transaction at one end of the process through to submission of the VAT return at the other, irrespective of how many pieces of software were used.