Functional compatible software is the cornerstone of MTD for VAT.
It will be used to maintain the compulsory digital records, calculate the return and submit it to HMRC via an application programme interface (API).
Functional compatible software is simply the name given to a software program, or set of compatible software programs, which are capable of:
- recording and preserving records in an electronic form
- providing information and returns from the records to HMRC in an electronic form using the API platform
- receiving information from HMRC.
It’s possible to mix and match software – the complete set of digital records needed for MTD for VAT don’t need to be held in one piece of software.
As long as there is a link between the different pieces of software, the records can be held in a range of acceptable digital formats.
The link between the software is key, and is a legal requirement where a set of compatible software programs is used.
HMRC is likely to produce a list of software from commercial software suppliers which can be used for MTD for VAT.
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