Running a small business can often feel like juggling multiple jobs at once: from product development to ground-level logistics and balancing finances, there are just so many activities involved. One task that simply cannot be overlooked is tax compliance. For VAT-registered businesses, this usually means submitting quarterly VAT Returns through HMRC’s Making Tax Digital (MTD) system – which can seem like a complicated process.
Although conventional wisdom might suggest outsourcing this task to a third party, there is a simple and cost-effective alternative allowing you to stay in control of your business’s finances while keeping 100% MTD-compliant: VAT bridging software. Read on below as we outline some of the difficulties associated with MTD for VAT compliance, and how VAT bridging software can help you to overcome them.
The Challenges of MTD for VAT Compliance
HMRC’s Making Tax Digital initiative is designed to reduce human error and increase the overall efficiency of the UK’s taxation system. However, digital tax is not without its complications for small businesses:
- MTD regulations – Since the introduction of Making Tax Digital for VAT, there have been strict stipulations on the management of business finances. As well as requiring businesses to keep comprehensive digital records, financial data must also be handled in new ways. One such rule involves the avoidance of manual data manipulation, and the requirement to use “digital links”. It is essential for all VAT-registered businesses to comply with these changes, as complex as they might seem.
- Resource constraints – As a small business, there are certain unavoidable limits on workforce and finances. When it comes to filing taxes, allocating the required personnel and time can impose a heavy burden, diverting valuable resources away from core business activities. One option is to hire an agent to file taxes on behalf of the business, but this can be a costly endeavour and requires the sharing of sensitive financial data with a third party.
- Digital skills – In comparison with previous paper-based systems, HMRC now expects business-owners to get to grips with new software and unfamiliar digital processes. In reality, many business-owners simply have little interest in developing their computer skills or learning to use new bookkeeping software. At the same time, it is often equally undesirable to pay over the odds for an agent to perform these tasks on your behalf.
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How Bridging Software Can Help
Despite the challenges presented by MTD, there is a simple and cost-effective solution for small businesses: VAT bridging software. In essence, bridging software for VAT is a smart way to connect your pre-existing financial records with HMRC’s MTD system. Let’s explore some of the benefits below:
- Minimal change – As an alternative to complicated bookkeeping software packages, VAT bridging offers a minimally invasive option. By digitally linking your existing financial records from within Excel, you don’t need to install or set up any new software to stay compliant. All you do is download a simple Excel template and connect it with 7 data cells from your current spreadsheet.
- Cost-effectiveness – As the quickest and simplest solution for VAT compliance, bridging software is also extremely low cost. Starting from only £8 per month (annual plan), we find it hard to imagine any accountant or bookkeeping software filing your VAT Returns for such good value!
- Speed and simplicity – VAT bridging software such as AbraTax is not only cost-effective but extremely quick and easy to use. In only three steps, you can submit your VAT Return directly to HMRC.
- HMRC-recognised software – Not only is bridging software (such as AbraTax) a quick and easy solution, but it is also HMRC-recognised. This means that it can be trusted to take care of your VAT Return, and MTD compliance is guaranteed. This allows for peace of mind and small businesses can rest assured: if there are any changes to HMRC regulations, AbraTax will keep you updated.
- Real-time accessibility – MTD VAT bridging software offers brilliant convenience, allowing you to set up, submit and monitor your VAT submissions on virtually any device. Be it your laptop, tablet, or desktop PC: in a few clicks you can access your account and get tax-compliant!
- Data security – Whereas accountants and digital bookkeeping packages typically require you to provide your financial records in comprehensive detail, bridging software for VAT requires the transfer of only 7 datapoints. After connecting these 7 Excel cells, 2 further values are automatically calculated, and the rest of your finances can remain secure in your business’s private spreadsheets.
- Free trials – The great news is that AbraTax offers a free trial to test out convenient and time-saving MTD compliance! Who can say no to free VAT bridging software?
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Conclusion
Although designed to reduce human error and increase overall efficiency, MTD for VAT can present numerous challenges for small businesses, adding strain to limited financial and time-related resources. Luckily, there is a simple and cost-effective solution which can empower you to stay in full control while remaining MTD-compliant: VAT bridging software. Bridging software such as AbraTax allows you to link your existing financial records with HMRC’s MTD system, thereby eliminating the need for third-party software installations or paying a costly agent to file tax for you.
So, why not give AbraTax a go? Click here to register for your free trial today.