With the need for information about Making Tax Digital for VAT filing tools building to a crescendo ahead of the start of the April 2019 digital record-keeping and filing tax year, AccountingWEB has opened a new MTD for VAT Software Reviews page.
The government’s long-term mission to introduce universal online tax filing is one of the most controversial and troubled technology projects it has undertaken, but with less than a month to go, it’s time for ditherers to make up their minds and go with suitable “functional compatible software”.
Once a business is signed up for MTD, the old HMRC portal with the nine-box data entry page will be shut down. To ensure a fully digital journey from business transaction to VAT return, HMRC expects records to be kept in digital software. As well as standard bookkeeping and smartphone apps, the base transaction records and more complex calculations to finalise VAT returns can be held on spreadsheets and fed through to HMRC via what it calls “bridging software”.
HMRC recently introduced a new beta test page listing more than 230 MTD products available now, the quest can appear daunting. Like MTD for VAT itself, AccountingWEB’s comparison table is at the public beta stage, but is designed to help accountants and small businesses narrow down their shortlists to more manageable proportions.
In ordinary circumstances, our Software Reviews are fed by user reviews collected from our online Accounting Excellence Software Awards survey. HMRC advises that it now has 10,000 organisations participating in the MTD for VAT pilot scheme, but that means there are very few user reviews to draw on. So we’re going live with product listings for those developers who have responded to our approaches and will add more names as quickly as we can ahead of the April go-live date and beyond.
If you have already tested some of these MTD products, you can help other users by sharing your experiences in our software survey.
Key buying criteria explained
Any software quest needs to start with a solid list of requirements, and for MTD, the best starting point is VAT Notice 700/22 Making Tax Digital for VAT. For software, the main requirements the notice sets out for VAT-registered businesses above the £85,000 turnover threshold are:
- Keep digital records of transactions for the reporting period in “functional compatible software”
- Existing VAT record-keeping requirements still apply and be available in digital form for the mandated period of six years
- VAT return data for the nine current fields must be derived from those digital records and passed via “digital links” from the transaction record through adjustments to the submission of the VAT return to HMRC – Cutting and pasting data between spreadsheets is not permitted
- The VAT submission to HMRC needs to go into the MTD system via digital programming links (APIs) from either the bookkeeping system or bridging software
Other software considerations
The comparison table lists basic functionality and software links as well as pricing for each product along with a more detailed summary of key buying factors.
After familiarising yourself with the requirements, the next step is to assess what your existing bookkeeping software supplier is doing for MTD – and whether they are going to charge extra for MTD filing or not. Most leading suppliers are very conscious of the MTD challenge and should have communicated their plans by now, and in the majority of cases the filing switch for existing software users is just a question of reconfiguring account IDs and authorisations for the new system.
But there are more issues, starting with whether you looking for a full record-keeping solution, a bridging tool or more sophisticated features not included in many of the more basic offerings.
Accountants in practice will have lots of clients to look after and support through new process. Under MTD they are no longer allowed to sign in using client IDs to file returns on their behalf. Instead, they are required to use commercial software products that communicate with HMRC via application programming interfaces (APIs).
To do this, tax advisers need to set up their own Agent Services Accounts on the MTD platform (in addition to the existing agent account on the HMRC Online server). Already, practitioners are expressing frustration with poor visibility of client status in the new agent portal. HMRC says it is working to improve these facilities, but commercial developers are already looking to fill the vacuum with new workflows and client dashboards to provide more comprehensive information.
With plans still on the table to migrate all business taxpayers into MTD for income tax, and corporation tax to follow at some point, MTD for VAT is just a starting point. So any conversations with practice software suppliers should focus on both the practice’s and the developer’s future MTD plans to ensure they are on the same path.
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.