Written by FCSA Business Partner, My Digital Accountants
What is MTD?
All VAT returns submitted for quarters beginning on or after, 1st April 2019 (where the VAT payer’s turnover exceeds £85,000) have to be submitted using HMRC’s new MTD platform. Making Tax Digital (MTD) is a HMRC initiative that means that VAT returns from April 2019 will need to be filed through software, the old government gateway will no longer be an option.
It was initially assumed that all businesses would have to invest in new software and move away from the traditional spreadsheet, unsurprisingly many felt left behind by this new legislation.
One of the more surprising statistics published last month from ICAEW suggested that over 40% of businesses that will be affected by Making Tax Digital in April 2019 are still not aware of it.
An important factor to consider is if your software provider is even on HMRC’s list of Making Tax Digital complaint list, if so, are they on the VAT compatible software list (A list) or the software suppliers with VAT compatible products in development (B list).
What is bridging software?
The new guidance means that you can continue using spreadsheets to prepare your VAT returns, Bridging Software allows you to keep recording your transactions on a spreadsheet and file a VAT return that is MTD compliant.
Bridging software is available in the market to individuals who want to avoid moving to accounting software and Bridging Software allows you to submit VAT returns by simply ‘keying’ into the bridging alternative (usually Excel based) this gives accountants a ‘soft landing’ in 2019.
How this will ease the change?
Now is the time to start preparing; accountants in particular, are already running out of time to find solutions for their clients. It has been estimated that it takes an average of 8-11 hours[1] to migrate a client to a cloud accounting package. For a small practice with 50 “spreadsheet” clients, the total time to get them on to an MTD platform is approximately 60 man days. There is a less time-consuming way to get these clients ‘MTD compliant’ and Bridging Software could be a way of avoiding this lengthy migration process.
Some Bridging Software providers allow accountants with more than one client submitting the option to set up their own account and manage multiple clients at once using their login.
What should you do?
When implementing you need to consider parallel running the software by checking with your current provider if you can participate in HMRC’s pilot before the deadline. Some software options are free to accountants and businesses wanting to join the HMRC pilot before April 2019.
For those businesses with multiple clients it must be considered that the process may be time-consuming as each client has to interface with HMRC directly in order to give permission to be moved on to the MTD platform, we strongly recommend submitting an MTD compliant VAT return prior to the mandatory deadline to get ahead of the curve, definitely before Christmas 2018!
[1] Accounting Web, Matt Flanagan 02/10/18 https://www.accountingweb.co.uk/community/blogs/mattflan/making-tax-digital-is-the-accounting-profession-taking-it-seriously
