The additional Making Tax Digital for VAT record-keeping requirements will be delayed until 1 April 2021 to allow businesses extra time to deal with the impact of covid-19.

Digital links effectively remove any human intervention in the VAT reporting process, such as copying and pasting data from a spreadsheet.

However, the existing MTD requirements for the submission of VAT returns through API-enabled software and digital record keeping remain in force.

In a letter to professional bodies and software developers, HMRC said: ‘We understand that the impact of covid-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges.

‘Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.’

The concession extends the soft-landing period put in place for digital links when MTD was made mandatory for registered businesses above the VAT threshold in April 2019. Up until now, businesses could apply for an extension on an individual basis if, for instance, they had complex or legacy IT systems. Cost alone would not have been an acceptable reason.

The news comes after HMRC announced businesses could defer their VAT payments.