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Small company seeks MTD software guidance

How do I choose suitable MTD-compatible software for my company?

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Although I am an accountant I have not worked in practice for many years so I am not familiar with current accounting software packages. I use a spreadsheet to record transactions for my company. Once a year I send the data, as a pro-forma spreadsheet, to an accountancy firm who read it into their Digita software package to produce the company’s accounts and tax computation to submit to HMRC and Companies House.

The company is not currently VAT registered, as it deregistered when the flat rate scheme advantages were removed in April 2017. However, the projected income for 2019 shows that it will have register for VAT from May or June 2019. Hence the need to have MTD-compatible software in place soon rather than later.

This software needs to submit the VAT return under the MTD regime and compile the company accounts with iXBRL tagging to submit with the corporation tax return. I see no point in having two separate software packages to do these separate tasks.

I don’t want to pay for lots of features I don't need such as management reports or invoice production. The company has less than 12 customers and sends a similar number of invoices per month. Expenses are few and are mostly zero-rated or exempt for VAT. I have the following reservations about accounting products:

  • If the data is kept in the cloud how can I be sure it is secure and which laws apply to protect the data?
  • If I stop paying the subscription fee for the software will I lose access to my business data?
  • How do I access and control a back up of the data?
  • If the software requires access to the business bank account, is this a security risk?

 I am posting this anonymously as I don’t want the company to be identified, but I will respond privately to those who reply with helpful suggestions.

Replies (9)

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By legerman
09th Aug 2018 16:07

You don't say whether the accountant will be doing the VAT returns. If they are they should still be able to use digita to compile the VAT return as well, assuming they transfer the data electronically.

If you're going to do it yourself all you need is bridging software to connect to your spreadsheet and file the return. Cheapest bridging software I've seen so far will be £40 + VAT pa for a single company. There's certainly no need to switch to the cloud.

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Replying to legerman:
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By akr129
15th Aug 2018 16:15

I am struggling to find bridging software that you describe. I have lots of small clients who use excel spreadsheets. Generally they export their bank accounts into a csv file (maybe once a month or a quarter) and then copy and paste columns as necessary into a bank page on their excel spreadsheet. They type a description of the item in a separate column and there is a balance column that I have previously set up with a dragged down formula that needs to agree to the balance on the bank statement. I also insert a pivot table that they can refresh as often as they like to give them year to date figures. Where do I find software to bridge from here to the HMRC website? I don't think paying a one off £40 plus VAT would be a problem but don't see the point in annual charges for cloud based systems. Who is offering this please? I think that VT and the neilson bridge software would work for bigger clients but what about the client who is only just managing to figure out how to do a list on a spreadsheet?

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Replying to akr129:
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By senthil1991
04th Sep 2018 08:34

Hi

Once the HMRC mandate for submission of VAT returns under the Making tax digital goes live from April 2019.
VAT registered businesses with taxable turnover above the VAT threshold are required to submit MTD returns through compatible softwares from April 2019.

HMRC is conducting a controlled Pilot currently where businesses can sign up and participate in a phased manner.

This pilot will also ensure easy transitioning before the live season beginning April 2019.

Software providers are constantly working with the support of HMRC for coming up with solutions to suit varied customers.

HMRC has recently released list of software providers who have showcased the application with HMRC and are connected with.

The applications not only help with the submission module where the returns are submitted.

the applications also provide useful interaction with HMRC systems where businesses can check their VAT obligations, VAT payments, View submitted VAT returns and other useful indicators.

Let me know if you would need any further information in this line.

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Replying to senthil1991:
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By akr129
04th Sep 2018 11:32

If you have the magic software solution I would be pleased to know what it is.

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Replying to senthil1991:
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By akr129
04th Sep 2018 11:32

If you have the magic software solution I would be pleased to know what it is.

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By Tim Vane
09th Aug 2018 16:08

Keep using Excel and fork out a few quid for bridging software. Cheaper and easier than switching.

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By NewACA
12th Jan 2019 06:28

I've now filed 3 different client vat returns on 123sheets.co.uk it cost me 30 something pounds for a 10 client licence until March 2020. Quick and simple excel solution.

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By david.bransbury
12th Jan 2019 11:12

As a fan of the cloud, Xero in particular I thought I would answer this point.

•If the data is kept in the cloud how can I be sure it is secure and which laws apply to protect the data? - All the major companies have certificates etc. Xero has the option of two step authentication which it recommends strongly.
•If I stop paying the subscription fee for the software will I lose access to my business data? - With Xero, you have access for a month after you stop paying. If you want it reinstated, Xero have recently made it easier. You course of you can download the NL as pdf or excel in case you need to refer to it some time in the future.
•How do I access and control a back up of the data? There are add-ons that will do back up for you, we don't bother. We are not worried about the data being lost and there is an excellent audit trail to see who and what has happened.
•If the software requires access to the business bank account, is this a security risk? Xero has lots of direct direct feeds, so the info is sent direct from the bank to Xero. There are Yodlee feeds used by Xero and other software companies which means you have to give a third party you bank log in details. WE DO NOT USE THIS.

Finally, I often hear people say I would never use the cloud but don't realise their banking details and tax details are already there even if they have never logged in.

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Replying to david.bransbury:
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By johnhemming
12th Jan 2019 12:29

"The Cloud" is not really something amorphous. It is using the internet to connect to a server that is run by someone else. Access to the data depends upon the terms offered by the people running the server.

One advantage of "The Cloud" is that the people providing the system have control over the equipment being used to run the system. This means that it is more practical for them to make sure it works in the round. A server system in someone's offices needs to be looked after. If it is a complicated system this is often best left to another company.

All of the MTD providers have to use the cloud in some form or other if only to do the "Open Authorization" process (sometimes called OAuth). That includes bridging providers (such as my company).

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