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What is the 'Soft Landing Period' for Making Tax Digital?

You must start following the MTD rules from the first day of your first VAT period that starts on or after 1st April 2019. 

HMRC has confirmed, however, that digital reporting requirements will be relaxed during the first year of Making Tax Digital (MTD) for VAT-registered businesses.

From 1 April 2019, for businesses with annual taxable turnover of more than £85,000 digital records must be maintained in what is defined as ‘functional compatible software’ – broadly, software or spreadsheets (or a combination thereof) which can connect to HM Revenue and Customs (HMRC) via an Application Programming Interface (API) – and these must capture more information than is currently required to be recorded. Maintaining paper records will cease to meet the legal requirements in tax legislation.

In theory there should be no human intervention such as cutting and pasting, or retyping figures, at any stage between the initial recording of the transaction and the submission of the VAT return. 

All transfers of data between different software packages should be via digital links, which can be as complex as a suite of accounting software, or as simple as spreadsheet figures automatically read into an accounting package. The digital links can stretch between your business and our firm using cloud based software. Transferring the VAT data as a spreadsheet attached to an email, or on a data stick, will also count as a digital link.

However, for the first year of mandation (VAT periods commencing between 1 April 2019 and 31 March 2020), businesses will not need to have ‘digital links’ for all software, and will be able to manually transfer or ‘cut and paste’ their records instead.

This does not include the submission of the VAT return itself, which must be shared with HMRC using a functional compatible software that can access HMRC’s application programming interface (API) platform. Manually entering the VAT return figures onto the HMRC portal will no longer be permitted.

According to HMRC, the soft landing period is only to allow businesses time to update legacy systems. It would be a mistake for businesses to use the soft landing period as a reason for delaying a fully digital solution for VAT. If you are unsure what you need to do - we can help!

The new MTD requirements may sound quite daunting but please rest assured that Moco can assist making this transition easier for you. Those businesses that are already using a recognised cloud accounting package are likely to benefit from a smoother transition and our team of experts have the knowledge and tools to assist and advise on the most suitable route depending upon your individual circumstances.

Take the next step:

To assist you, Morris & Co are hosting a number of FREE interactive seminars. If you would like to come along please email  mxf@moco.co.uk to register. In the meantime if you have any immediate questions regarding MTD for VAT please get in contact with Desirie Lea or Martin Lanceley on 0151 348 8400.