ISBISO LTD

Ipswich Suffolk Bookkeeping Interactive Services Online

  MTD (Making Tax Digital)

               ARE YOU SURE YOU ARE COMPLIANT ?

   ARE YOU READY FOR PHASE TWO “DIGITAL LINKAGE”

What is Phase Two ?

Simply put use of multiple systems for accounting purposes must be digitally linked.

You may use a separate system for Invoicing, Petty Cash, Cost Accounting, bookkeeping

Effective from April 2020 these systems must be able to transfer data to the main MTD complaint accounting software.

The separate systems must be able to transfer  tax point date, value, the VAT rate applied and the VAT element into the main MTD complaint software, on an automatic basis.

Failure to operate systems that automatically transfer data, meaning no manual intervention, will be deemed to be non-compliant.

Non-compliance will incur HMRC penalties –up to 100% of undeclared VAT as a result of careless or deliberate inaccuracies.

Why Phase Two ?

HMRC consider copy/paste operation and human intervention as risky and error prone.

HMRC wants to reduce the potential for errors.

Further alterations become possible to pre-existing submitted data, whether intentional or genuine misunderstanding, to systems where it is possible for manual input.

What was Phase One - “Soft Landing”

As many businesses know MTD for Value Added tax came into force from April 2019.

Under that system any business VAT registered had to use compliant software to submit periodic VAT returns

During this first year on implementation HMRC adopted a “soft Landing period”. No penalties for not being fully compliant, allowing a basic “copy/paste” of data (using excel based systems), giving time for businesses to adapt.

This is coming to an end April 2020

Phase Two - “Digital Linkage”

Effective from April 2020 any businesses registered tor MTD now face a possible change to their approach.

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. This could be a transfer or exchange of data within a business (for example, between 2 systems) or a transfer of data to a tax agent in order that they can prepare a VAT Return or make a calculation.

A digital link includes 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.