Running a small business can be a hugely satisfying (not to mention lucrative!) pursuit, but it’s important not to fall short of your legal and administrative duties. One such essential task for many businesses is ensuring smooth and timely VAT submissions. However, HMRC VAT Returns can take up precious time and money, stealing focus and precious resources from your small business’s day-to-day activities.
Luckily, there is a quick and low-cost solution for VAT-registered businesses to meet their tax obligations with ease: Excel bridging software for MTD.
What is MTD?
MTD stands for “Making Tax Digital”, referring to HMRC’s recent initiative to digitise the UK’s tax system. The first significant shift for small businesses was the introduction of MTD for VAT, beginning April 2019. Since then, VAT-registered businesses have been required to comply with new measures when filing their taxes for VAT.
(That being said, there is more to MTD beyond VAT. Check out our other info on MTD, Income Tax Self Assessment and sole traders.)
What are the MTD for VAT rules?
The rules for MTD for VAT are pretty straightforward, despite the groundbreaking implementation. In general, businesses are expected to:
- Store all financial records digitally
- File quarterly VAT Returns using MTD-compatible software (online)
For more details, and to read info regarding MTD exemptions, check the HMRC website.
Complying with MTD for VAT
When keeping track of finances, it’s natural to use software that’s familiar to us. Therefore, many small business owners use Microsoft Excel as a convenient bookkeeping tool. By using Excel this way, businesses can comply with HMRC’s stipulation for maintaining digital records – and with minimal effort.
However, Excel is not inherently MTD compatible. This leaves business-owners with a conundrum: Excel is a convenient and inexpensive means for storing financial records, yet it cannot be used alone to submit VAT Returns. Here is where MTD Excel bridging software comes in – read on below!
Save time and money with VAT bridging software
Bridging software provides a means for “bridging” the gap between Excel and HMRC’s MTD VAT Returns system. By doing so, it allows business-owners to continue using Excel as a bookkeeping tool while also staying MTD compliant.
Bridging software can save you enormous amounts of money and time. Without bridging software, you would need to transfer your records into a whole new system and maintain your records there – often at significant cost (typically a subscription).
Spending time transferring records and familiarising yourself with unknown software is a burden which many small businesses could do without. Therefore, it makes sense to use bridging software instead, as a minimally invasive and very cost-effective option (starting from only £8/month).
Furthermore, bridging software providers such as AbraTax are officially recognised by HMRC. This means that they can be counted on, and will keep you up to date with any changes in HMRC’s legislation.
How does MTD bridging software for VAT work?
Bridging software for VAT is simple: you download a quick and easy Excel template. The template enables you to connect your VAT-relevant data with HMRC’s system. Once you have digitally linked a few (fewer than 10) Excel cells, you simply upload it back to us to submit your VAT Return. You’ll even receive instant confirmation and an official HMRC receipt.
In addition to saving you time and money, our bridging software maintains your privacy. To fill in our template, you only need to connect 7 cells from your current Excel spreadsheet. (A further 2 cells are automatically calculated for you!) The rest of your data stays private with you.
Conclusion
In summary, HMRC’s Making Tax Digital scheme is doubtless a monumental shift in tax practices. Nonetheless, remaining tax-compliant is not as hard as it sounds! By making use of HMRC-recognised MTD bridging software, such as AbraTax, it takes only a few clicks to connect your existing Excel-based bookkeeping with HMRC’s VAT Return system. Furthermore, bridging software is a highly cost-effective solution, allowing you also to avoid the hassle of transferring your data into unfamiliar software.