Century Sage Clarifies Digital Tax Data Rules to Avoid Penalties
Century Sage provides guidance for businesses on Making Tax Digital's digital linking rules to help them avoid penalties from the tax authority.
Software provider Century Sage has issued guidance clarifying the digital linking rules under the UK's tax authority HMRC's Making Tax Digital (MTD) initiative. The advice aims to help businesses avoid penalties associated with non-compliance.
The MTD regulations require businesses to digitalize their VAT and Income Tax data and processes. A key component is the requirement for digital links when transferring accounting data between digital sources. Manually copying and pasting data, or re-keying information into software after manual entry, is prohibited and can lead to penalties.
Century Sage highlights that issues often arise when accounting data is transferred manually, for example, from spreadsheets to accounting software. While spreadsheets can still be used, they must have either bridging software or formula-based digital links to ensure automatic data transfer. These rules specifically apply to the data mandated by MTD, such as daily gross takings for VAT retail schemes or Flat Rate Scheme purchases.
Businesses must ensure that all relevant accounting data is entered only once and then transferred digitally. Manual adjustments to data, such as for partial VAT exemption or capital goods schemes, are permitted as long as the underlying data remains digitally linked. Century Sage urges businesses to review their current practices to ensure compliance.