Making Tax Digital for VAT: Your software options

As you may be aware, most businesses whose taxable turnover is above the current VAT threshold (£85,000) will be required to comply with HMRC’s Making Tax Digital (MTD) for VAT requirements for VAT periods commencing on or after 1 April 2019. Some types of VAT registrations have been delayed until 1 October 2019, but your business still needs to be prepared.

MTD for VAT goes beyond just being compliant with the new requirements. It’s an opportunity for you to ensure you’re future-proofing your business and reviewing your business needs as a whole – now is a great time to focus on your business objectives.

Does your accounting system comply with HMRC’s requirements?
The main area businesses need to be focusing on is whether their current accounting system is going to be compliant with the new MTD requirements.
In order for your system to be compliant it must:

  • Be able to transmit your VAT returns to HMRC through the accounting software (as opposed to filing via the online portal or paper returns - which are the current methods available).
  • Keep your VAT records digitally.

You have three options to consider

1. Your current accounting system is already MTD-compliant.  
HMRC have a list of approved accounting software providers which communicate with HMRC tax systems.
If your accounting software features on this list then we would recommend you speak to your software provider to ensure you are set up correctly and ready to go. We are happy to help you with any queries you have about this.


2. Your current accounting system is not MTD-compliant, but you do not intend to change software to a package that is.  
If your software is not directly compatible with HMRC’s new system, you will need to consider using a ‘bridging solution’, which helps your software link up to HMRC system by extracting your data into an API-enabled spreadsheet which can be submitted to HMRC.
 
Again, HMRC has a list of approved bridging software providers for you to consider. This can be quite a complex process as you need to ensure that you have proper digital links in place between your system and the bridging software. We would be happy to talk to you further on this to make sure you are correctly set up, or can assist with this process.


3. Your current accounting system is not MTD-compliant, and you want to change your software to one that is.  
Changing accounting systems can bring lots of benefits to your business:

  • It’s a chance for you to review any gaps in your current systems and controls and to consider any areas for improvement. This will ensure your records are accurate and secure.
  • Assessing efficiencies in your software and processes. This involves taking a step back and considering whether you’re making the most of the technology and software functionality available to you. By reviewing your processes, you can ensure you spend time on working on activities which add value to your business.
  • Preparing for growth and change in your business. Are you confident that your current systems will cope with changes to your business strategy and plans for growth?

Let’s ensure that your system is not only ready for MTD for VAT, but that you are also ready for any additional digital reporting requirements which may come into play in the future.

If you have any questions around Making Tax Digital for VAT, please contact Keith SteeleNick McChesney or Natalie Moore.