From April 2019, businesses with annual taxable turnover of more than £85,000 will be required to maintain digital records for VAT and submit quarterly returns alongside the annual tax return.
Under the requirements of MTD, any transfer of data between software programs must be carried out using digital software.
However, for VAT periods starting in the 2019/20 tax year, 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 the Revenue using an application programming interface (API).
In December 2017, HMRC said it anticipated there would be a “soft landing period without application of record-keeping penalties” in 2019/20 to give businesses time to adjust to the new system.
Its VAT notice, published in July 2018, legally confirmed the relaxed reporting requirements but made no mention of how the soft landing on penalties will apply.
John Cullinane, tax policy director at the Chartered Institute of Taxation, said:
“It would have been completely inadequate for the law to require you to do one thing, but then for HMRC to say informally that they would not enforce it.
“Most businesses want to comply with what the law requires them to do, and this approach from HMRC helps ensure that is the case.”
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