When HMRC first announced MTD, it was a two phase process.
What’s changing from 1 April 2021?
Under phase one it was just the submissions which were required to be digital.
Phase two will require businesses using different pieces of software to have ‘digital links’ between them.
A ‘digital link’, as per HMRC’s definition, is a transfer or exchange of data that can be made electronically between software programs, products or applications without the involvement or need for manual intervention.
There are strict rules on what defines a digital link for MTD.
According to HMRC, they have two characteristics:
The most effective way to ensure businesses meet their digital linking obligations is to use MTD-compatible accounting software, (such as Xero), that allows you to record and submit your MTD data from one place.
MTD future deadlines
From April 2022 the MTD for VAT regime will be expanded to include all VAT registered businesses, with Income tax due to follow in April 2023.
Take action now
If you aren’t sure whether your processes are MTD compliant and need further advice please contact us