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VT Transaction+

Navigation: Making Tax Digital (MTD) for VAT

Digital links

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Please note the information in this help topic is for guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. For further information of your obligations regarding digital links, please refer to HMRC VAT Notice: 700/22.

HMRC digital links requirement

The digital links requirement is outlined in HMRC VAT Notice: 700/22.

Essentially, this means that any transfer of data within your system for recording VAT and submitting VAT returns, must be electronic.

In practice, this means the figures in your VAT return should be traceable back to the records of the individual transactions through a series of digital links. A digital link is an electronic transfer of data.

The transactions form part of the VAT records that must be kept digitally and should contain certain information (mainly the date of supply, VAT rate, VAT amount and net amount). For full details of the information they should contain, and other records you need to keep digitally, refer to para 3.3 of HMRC VAT Notice: 700/22.

Applying the digital links requirement to VT Transaction+ and VT Cash Book

VT Transaction+ or VT Cash Book used on their own

The figures in the VAT return in VT Transaction+ are derived from transactions entered in the software.

These transactions are listed in the tabs to the right of the VAT return, and contain the date, VAT rate, VAT amount and net amount.

Therefore, the process from the starting point of entering transactions to submitting the VAT return is digitally linked, provided the individual transactions are contained in VT.

VT Transaction+ or VT Cash Book used with other programs

If you submit your VAT return in VT Transaction+ or VT Cash Book (VT), but enter transactions in VT from another program (e.g. an Electronic Point of Sale (EPOS) system), you need to determine if a digital link is also required between the other system and VT.

You should refer to HMRC's examples of where digital links are required to determine this for your own software set up.

The example closest to using VT with another system is Example 9. On the basis of this example, it follows that:

if you re-enter or import the individual transactions in full (rather than summary totals) to VT, and they contain the required information of the date of supply, net amount, VAT amount, and VAT rate, then a digital link is not required between VT and the other program.

if transactions entered in VT do not contain all of the required information (e.g. if only summary totals are entered), but the other system does, then a digital link is required between VT and the other program.

If a digital link is required, VT Transaction+ is able to import data (using the Universal Input Sheet or journal entry), which is an acceptable digital link. VT Cash Book does not have an import function.

Applying the digital links requirements to VT MTD for Excel

The figures in the VAT return must be linked digitally to the records of the underlying individual transactions. You cannot type the figures directly on your return or copy/paste them.

Using a standalone spreadsheet to prepare the VAT return

If you use spreadsheets to maintain your sales and purchases transactions.

 

In practice, this means the individual transactions and their totals should be contained in the same spreadsheet, with the totals linked to the relevant boxes in the VAT return using an Excel formula*. Copying and pasting is not acceptable as a digital link.

*In Excel, a cell can be linked to another cell by copying the cell (right click > Copy), then in the other cell, right clicking and selecting Paste > Paste Special > Paste link. This links the two cells rather than copying and pasting the figure from one to the other.

Using a spreadsheet with other programs

This scenario would typically involve exporting reports of sales and purchases transactions from another software system to Excel, then using these reports to prepare a VAT return in Excel.

To ensure digital links are in place:

Method 1

Export/import the individual transactions in full (rather than just summary totals) from the other program to an Excel spreadsheet

Link the cells* containing the totals of the transactions (i.e. output VAT, input VAT, total net sales, total net purchases and required figures) to the cells containing the relevant boxes in the VAT return*

Method 2

Importing the totals of the transactions from the other program to the spreadsheet

Then linking the totals of the transactions to the relevant boxes in the VAT return using an Excel formula*

Method 3

Importing the totals of the transactions from other program directly to the VAT return boxes on the spreadsheet

 

*In Excel, a cell can be linked to another cell by copying the cell (right click > Copy), then in the other cell, right clicking and selecting Paste > Paste Special > Paste link. This links the two cells rather than copying and pasting the figure from one to the other.

In method 1 there does not need to be a digital link between the other program and the spreadsheet since the individual transactions are contained in full in the spreadsheet.

In methods 2 and 3, provided there is also a digital link within the other program between the totals being imported and the individual transactions, the VAT return figures are then digitally linked backed to the underlying transactions.

HMRC accept the import/export of data as a digital link. They give other examples of acceptable digital links in para 3.2.1 of VAT Notice 700/22.

Example of where digital links are required

HMRC provide examples of where digital links are required here.

VAT calculations made outside of the software

In VAT Notice: 700/22, HMRC state the following regarding this:

'HMRC recognises that there may be points during preparation of your VAT Return when calculations will have to be made outside of any software you use to keep the digital records, or there may be a need to enter data into your software from particular sources. For example a capital goods scheme adjustment calculation done in a separate spreadsheet may need some form of input by hand into the software that will send your VAT Return information to HMRC'.