Making Tax Digital
So what’s the right digital tax software for your business? Below are some handy guidlines to help you make your decison.
Digital Tax Software
In the last Spring statement the Government said it will not extend Making Tax Digital (MTD) to income taxes and corporation taxes, which isn’t quite delivering on its promise in its 2015 Budget to ‘end the tax return,’ as we know it. Despite this, since 1st April, businesses are required to start submitting their VAT digitally. But with so many accounting software providers constantly claiming to be the latest and best on the market, how do you know what’s the best one for your business?
Is the digital tax software HMRC compliant?
If the software isn’t HMRC compliant then you won’t be able to file your return so check that it is clearly stated on the software provider’s website or marketing literature or check the HMRC approved list of providers. When registering for MTD you will be required to link your software to HMRC and give authority for your software to transmit the data to HMRC.
Is the digital tax software easy to navigate?
Some programmes are much easier to use than others so request a trial first to ensure it suits your business or technology experience. Programmes like Quickbooks and Zero are easy to use but are also great at drilling down and finding data and transactions quickly, saving huge amounts of time when compiling end of year reports or VAT submissions. You can also easily scan via your phone and attach purchase orders, receipts or expenses – which is useful when trying to find historical evidence behind certain transactions.
Does the digital tax software have on demand support?
Transitioning over to a digital tax return can come with some challenges so check the provider has a help centre and ideally more than online FAQs for those individual concerns. Some offer live or email chat to help resolve problems or answer questions, but few, other than Quickbooks, offer a phone helpline. Quickbooks is particularly good as you can speak to a live person to swiftly resolve issues and reduce frustration.
Is there user training available for the digital tax software?
User training is critical to help to get to grips with the software quickly and to reduce the risk of errors. Your local accountancy firm should also help by hosting training seminars or webinars to guide your through the software, so it’s best to find out when these sessions run.
We wary of pricing and add-ons
Shop around before choosing your software provider to compare pricing against functionality and challenge on price if necessary. Check for any hidden costs and be wary of discounted incentives. All software providers offer a basic rate of around £20 a month for their standard functionalities typically including purchase, sales and nominal ledgers (profit and loss and balance sheet) and basic level VAT calculations but some charge extra on top of this for additional features. Quickbooks for example, includes the ability to process in foreign currency as standard so always check what your business requires before choosing the best software.
Do I need bridging software?
MTD software are cloud based apps so they can be connected through other digital devices and if your company uses an external expenses programme such as Expensify or Concur, then check it can sync with your MTD accounting app.
If you continue using spreadsheets, you’ll need a bridging software application to submit your return (but you’ll only be able to do this for 12 months before having to fully digitalise). The data will be extracted from the spreadsheet and uploaded into HMRC’s MTD platform. The spreadsheet will need to be either API enabled or used in combination with an MTD compatible software product so the data can be sent to HMRC.
Be aware of HMRC penalties
The HRMC penalty for failing to keep required VAT records digitalised is up to £500 but HMRC has introduced a ‘soft landing’ to make allowances where a company has made reasonable efforts to comply.
No surcharge is payable if the VAT liability is paid by the due date, but the current surcharge process will still operate – so it’s more important than ever to ensure you’re fully MTD aware and ready for your next VAT return from September this year.