A UK VAT-registered business maintains its digital accounting records in one software package, then needs to transfer certain figures into a separate spreadsheet used to calculate an adjustment before submitting its VAT Return. Under HMRC's Making Tax Digital for VAT rules in VAT Notice 700/22, which method of moving that data satisfies the digital link requirement?
- Manually retyping the figures into the spreadsheet, provided the same person who read the figures also types them in
- Copying and pasting the relevant cells from the first software package directly into the spreadsheet
- Reading the figures from an on-screen report and keying them into the spreadsheet from memory or from a printed copy of that report
- Exporting the data as a CSV file from the first software package and importing that CSV file into the spreadsheet, or using a linked, formula-driven cell reference between the two
Why D? And why not the others?
Correct answer: D. Exporting the data as a CSV file from the first software package and importing that CSV file into the spreadsheet, or using a linked, formula-driven cell reference between the two
HMRC's Making Tax Digital for VAT rules require that once data enters the digital records, any further transfer between software programs, products, or applications must happen through a genuine digital link, and both an exported-and-imported CSV file and a linked or formula-driven cell reference between two pieces of software satisfy that requirement because the data moves electronically without manual re-entry. Manually retyping figures into a spreadsheet is explicitly not a digital link regardless of who performs the retyping, because HMRC's rule concerns the method of transfer, not the identity or reliability of the person carrying it out. Copying and pasting cells is likewise explicitly excluded by HMRC's guidance, even though it might seem more automated than typing from scratch, because it still requires a person to select and move the data rather than the software transferring it directly. Reading figures from a screen or printout and keying them in from memory is simply a variant of manual retyping and fails the digital link test for the same reason: the transfer depends on human transcription rather than an electronic connection between the two systems.
Source: GOV.UK: VAT Notice 700/22, Making Tax Digital for VAT — digital links