Avalara MTD Filer is a free product which will read data from an Excel spreadsheet, and submit the VAT return figures to HMRC in the format required under MTD.
Many VAT registered businesses and their advisers have worried about the cost of MTD compliant software, and how they will convert accounting systems based on spreadsheets to meet the filing requirements of MTD for VAT. The Avalara MTD Filer meets both of these problems head-on, as it is free to download, and it will automatically install itself into any computer’s version of Excel.
The Avalara MTD Filer software will allow the business to review, authorise and send VAT returns to HMRC via the approved API for MTD. That API will also retrieve from HMRC the VAT payment history for all the VAT returns submitted by the business, show all its VAT liabilities, and highlight whether there are any outstanding VAT returns.
How does it work?
Richard Asquith, VP Global Indirect Tax at Avalara, explained that as soon as the MTD Filer code is downloaded from the Avalara website it inserts itself as an add-in to the version of Excel on the computer. The user can then link their VAT data to the spreadsheet. Asquith commented: “We have made the instructions as simple as possible as VAT registered businesses need a quick and easy solution to VAT filing under MTD.”
— Rebecca Cave (@TaxwriterLtd) October 2, 2018
Suitable for small business
The Avalara MTD Filer is suitable for small businesses who currently use spreadsheets to keep their VAT records. HMRC has confirmed that spreadsheets do qualify as digital records for the MTD for VAT regulations (SI 2018/261).
As long as the spreadsheet contains all three of the data items required for sales and purchases (see box) for each transaction, the business will be MTD-compliant. Retailers who use one of the retail schemes for VAT will be permitted to record the gross daily takings as they do now, rather than having to digitally record each individual transaction.
Asquith said: “It feels great that we're able to help the estimated 800,000 small businesses that would otherwise have to invest time and money in learning to use some software.”
The Avalara MTD Filer also provides a digital link from the spreadsheet to the API which submits the VAT return, so the digital link element of the MTD regulations is also met.
Businesses with multiple accounting systems often use a spreadsheet to bring together the VAT figures from the divisions or companies, in order to consolidate the data into one VAT return for the organisation or group.
The Avalara MTD Filer will be a simple solution for these larger organisations, as they won’t have to develop new software to replace the functions undertaken on the spreadsheet. The links between the consolidating spreadsheet and the various accounting systems will have to be digital from April 2020, but for 2019/20 HMRC has granted a soft-landing to allow time for those digital links to be developed.
When HMRC reluctantly agreed that a spreadsheet would be an acceptable medium in which to record and preserve digital records, they invented the term “bridging software” to fill the gap between the spreadsheet and the API which is used to submit tax data to HMRC. At that stage bridging software was still a figment of HMRC’s collective imagination, but now it is a reality.
The Avalara MTD Filer is not the only bridging software on the market. Intuit has launched bridging software which will transfer Excel-based calculations into the new QuickBooks end to end MTD for VAT software. BTCSoftware has announced an MTD for VAT solution which posts data from spreadsheets into a compliant submission, and Absolute Accounting Software has jumped in with Absolute Excel VAT Filer. We also understand that Liquid VATFiler will be free for single users and single company entities.
Meanwhile, VT Transactions+ has partnered with Forbes Computing and a number of other software producers, to develop VAT filing applications which suck-in VAT data created within VT transactions and serve up an MTD-compliant VAT return.
Accounting giant PwC has also produced some bridging software which it is making available to charities for free, and presumably will sell to other organisations.
Data required for each transaction
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.