HMRC’s VAT notice (VAT Notice 700/22 Making Tax Digital for VAT) setting out guidance for Making Tax Digital (MTD) for VAT was issued last week by HMRC. I haven’t written about MTD for some time because it was being put back and amended so often it just became confusing.

And even now some believe it’s like the boy who cried wolf and will be deferred again. But we do now have something definitive to work with and so it’s time for businesses to start planning.

The long awaited notice was accompanied by a list of software applications to support online filing and a number of programs designed to bridge the gap between MTD and spreadsheet digital records.

It also stipulates what information needs to be recorded and retained digitally for each VATable supply and claim made by the business, which in essence includes the time of supply (tax point); value of the supply (net value excluding VAT); and rate of VAT charged or claimed.

The VAT notice also addresses the issue of what constitutes a digital record. Digital records of the required information can be kept in a range of compatible digital formats, but the transfer of that data must be digital.

The official guidance is accompanied by a list of 18 software developers offering MTD for VAT solutions and documentation describing seven different scenarios or “customer journeys” describing how spreadsheet users would plug into MTD systems via application programming interfaces (APIs). Information can only be submitted to HMRC via application programming interfaces (APIs) from commercial software, bridging software or API-enabled spreadsheets, HMRC explained.

VAT adjustments such as partial exemption “are not part of the MTDfB journey”, the accompanying document explained, and “can be calculated separately outside the digital records of the organisation and transferred in digitally or manually”.

Cutting and pasting does not constitute a digital link, the notice warned, but the restriction will not be enforced until the initial “soft landing” introductory period ends after the first year of MTD for VAT after 1 April 2020.

The list of MTD for VAT software developers is notable for the larger software developers not on it. Small businesses are taken care of, but if a business uses Oracle or SAP, those developers are not on that list.

We also interpret the VAT notice as HMRC acknowledging that spreadsheets are fine, and by extension all legacy software such as VT Transactions+. The magical ‘digital link’ is not required for 12 months until 2020 and quite frankly we doubt that it is enforceable anyway.

Noel Guilford