What breaks the MTD digital link in multi-channel e-commerce
Typing a figure from a spreadsheet into a VAT return breaks the Making Tax Digital digital link, even when the figure is correct: the requirement is that data moves between systems without manual re-keying, from the transaction record through to the return. This is an illustrative example of how Salt approaches multi-channel VAT, using a four-channel UK seller as the profile.
Scenario — an illustrative example of how Salt approaches this problem. Not a description of a specific client engagement.
The business shape it describes: UK e-commerce seller, 4 sales channels, VAT-registered.
- Scenario covers
- Multi-channel bookkeeping and VAT return preparation under Making Tax Digital
- Jurisdiction
- United Kingdom
- Sector
- E-commerce
- Take a UK VAT-registered seller operating across a marketplace, its own store, a wholesale channel and a subscription line, each with its own payout schedule and fee structure.
- The VAT return is assembled by exporting each channel into a spreadsheet, adding the totals, and typing the result into the return.
- The manual re-keying breaks the MTD digital link requirement, which applies from the digital record through every transfer to the point of submission.
- Marketplace payouts recorded net, so both revenue and fees are understated and the VAT base is wrong before any classification question arises.
- Zero-rated and exempt items conflated. The two look similar on an invoice and differ entirely on input tax recovery, so the recovery position is wrong in a way the return does not reveal.
- No separation between UK domestic sales, exports and post-Brexit sales into the EU, which have different treatment and different evidence requirements.
- Connect every channel so transactions flow into the ledger rather than being exported and re-entered, which restores the digital link at its most common breaking point.
- Rebuild payouts gross, separating sales, platform fees, shipping, refunds and VAT per line and per channel.
- Correct the zero-rated and exempt classification at the transaction level and recalculate the input recovery position for the affected periods.
- Separate domestic, export and EU sales so each carries its own treatment and its own evidence requirement.
- Move VAT preparation into the ledger so the return is generated rather than assembled, and submit under MTD through the client's own or their agent's HMRC credentials.
- Restoring a digital link across four channels means understanding each channel's payout structure well enough to rebuild it gross, with the correct VAT treatment line by line.
- The re-keying is the compliance breach, but the net-recorded payouts and the conflated zero-rated and exempt items are why the numbers are wrong. Fix only the link and you have automated an incorrect return.
- The seller would be able to generate the VAT return from the ledger with an unbroken digital link, rather than assembling it and typing in a total.
- Each channel would reconcile gross, so the reported revenue figure matches what customers actually paid rather than what the platform deposited.
- Input tax recovery would rest on a correct zero-rated and exempt split rather than a blended assumption.
What we'd flag
Connecting the channels is the visible fix and the least important one. Restating payouts gross usually changes the revenue figure the owner has been quoting, and correcting the zero-rated and exempt split can move the recovery position in either direction.
What breaks the MTD digital link in multi-channel e-commerce
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