Making Tax Digital (MTD) for VAT is the first stage of the government’s initiative to completely digitalise tax.
It took effect on 1st April 2019, with full compliance starting on 7th August of the same year. This is because the first submission of MTD for VAT records is required by this time (for those businesses whose first VAT quarterly ended on 30th June 2019).
Not everyone is ready to meet the deadline though. There are a number of things to consider: first, working out whether it’s mandatory for you to comply with MTD for VAT – a basic ruling is that you’ll need to if your turnover exceeds the current VAT registration threshold (£85,000 as of 2019/20). You will also need to register with HMRC – this must be done here.
To make it easier, HMRC has conceded the use of spreadsheets. They will be allowed under the Making Tax Digital regime, although bridging software will be required to file the VAT return to HMRC. You may also be using an old bookkeeping system that has not been updated to comply with MTD for VAT. If this is the case, you will also need to use bridging software to make your VAT return submissions to HMRC.
We explain how bridging software works, along with its benefits, in this guide.
How does VAT bridging software work?
Once you have registered with HMRC for MTD for VAT and received email confirmation that your account is active, you will then need to ‘authorise’ your bridging software to link with your HMRC account. The software will help guide you through these steps.
Bridging software then transfers your VAT information to HMRC’s systems via an incredibly simple digital process. You’ll complete your spreadsheet, or your non-compatible bookkeeping software as usual, then upload or link the VAT 100 report to the bridging software product.
After this step is completed, it’s best to check that the prepopulated form’s values match the ones of your VAT 100 report.
When you are happy, you can submit the VAT return direct to HMRC.
What are the benefits of bridging software?
A key reason many are opting for bridging software is that it’s generally cheaper than the other types of MTD-compliant bookkeeping tools. SMEs are finding an average £564 cost associated with using them, as they need to pay one-off charges or annual subscriptions. And this is just small businesses – larger ones are experiencing an even higher price tag.
It also allows businesses to continue using their existing spreadsheet or non-compatible software.
Bridging software’s tools bear a close resemblance to the requirements of the nine VAT return fields and are a simple way of filing your VAT return under the new MTD regime. They will also show you a history of MTD for VAT submissions, along with details of the VAT payments due and made.
What are the limitations of Making Tax Digital bridging software?
Whilst incredibly beneficial, the software does have a downside. It’s not able to be employed for other parts of MTD compliance, such as electronic record-keeping. You will still need to use your spreadsheet or non-compatible bookkeeping software.
Who can take the most value from bridging software?
Anyone dealing with the VAT return process will benefit from bridging software – from accountants submitting on behalf of their clients to small and large businesses filing for themselves.
SMEs, in particular, will find the tools valuable. This is because of the higher cost of other types of software, and the time required to get to grips with them.
It’s also particularly beneficial to those who already have accounting software in place, but it’s not compatible with MTD.
Getting the best out of MTD for VAT bridging software
Now you know when and how to get ahead of MTD for VAT, along with how bridging software ties in with it, you can take advantage of these tools.
All you need to do is make sure that you choose the right MTD for VAT bridging software. With GoSimpleVAT, you’ll be able to benefit from retaining your existing bookkeeping process if you currently use spreadsheets.
It offers you:
- The ability to import VAT reports from any spreadsheet or PDF
- A streamlined process with easy-to-understand dashboards
Plus, our software is on HMRC’s recognised list of suppliers, so you can rest assured that your VAT returns are submitted using a completely compliant tool.
To find out more about the value of using GoSimpleVAT as your bridging software, get in touch with our team today.