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The digital link requirement is that there must be no re-keying of information right through to the submission of the VAT return. It is necessary for some businesses to key in adjustments to the data, such as partial exemption and margin scheme adjustments, but other than that, everything must be transferred using digital tools. In particular, there must not be any manual copying and pasting of data from one part of the system to the other.
In this example we take a small business using a practice management system for bookings, billing, and other practice management features, and which uses QuickBooks for its accounts.
At the end of each quarter the business extracts the total invoices for the quarter from the practice management software and makes an entry in QuickBooks to reflect the total sales and VAT for that quarter. This is processed as a single invoice for the total amount to a single customer account, as the debtor details are held in the practice management software.
When the digital links requirements are in force, this process will not meet the digital link requirements. The business must either re-key each individual invoice into QuickBooks, so all the digital records for VAT are held on the same system, or alternatively, must get the data into QuickBooks by means of a download / upload process. The same applies to businesses which record daily takings on a separate till system.
One solution is to download from the practice management software/till system into Comma Separated Value (CSV) format which can be uploaded directly into QuickBooks. An alternative is to use spreadsheet functionality to form a totals page (using relative cell referencing, but not manually copying and pasting) which is saved as a CSV and then uploads as a single record. This method is particularly useful for downloads that run to many hundreds of lines.
This article was featured in our February Vat & tax bulletin, to read the bulletin click here.
If your business is registered but currently trading below the £85,000 threshold you need to ensure that the digital link aspect of the requirements is considered immediately as there is no “soft landing period”.
You may consider deregistration, but this needs to be carefully thought through and is not a viable option for those who want to expand in future. HMRC are expected to bring in digital record keeping during routine checks and therefore you should review the journey of your data to the VAT return to check if there are any manual or cut and paste steps and address what can be done to rectify them.
Buzzacott offer a bridging software solution for clients who do not use API enabled software packages and we would be happy to discuss a solution that is right for your business. Simply complete the form below and one of our experts will be in touch.
