Making Tax Digital – Advice for clients

The purpose of this Blog is to make clients aware of the full picture with regard to Making Tax Digital (“MTD”). If you think that you are affected then you should speak to your Account Manager for more information. You need to read this in detail if you are VAT registered and/or over the VAT threshold.

HMRC have announced that the new system will be effective from April 2019. There is still some scepticism that the HMRC software will be ready in time to replace the present system. However, the new statutory rules are already in place so we are working towards making the change by April.

What is MTD?

There are two parts to MTD.

First, you must have an accounting system which is on a computer – not just a paper based system. A phone can be a computer!

Second, that computerised system must be capable of submitting your VAT online without you needing to re-key that information. At the moment you can keep the records in any way you like – and simply type the VAT return figures into a form on the HMRC website. That facility will be withdrawn.

So that you are clear – the accounting system does not need to be a fully fledged commercial system – many businesses will continue to use spreadsheets – which can talk to HMRC. However, for many clients the best approach will be to undertake a complete review of how they record their business transactions.

Technical Issues

There are three ways that you can use to connect to HMRC

1   Use a software product which can talk directly to HMRC software

2   Use bridging software which is a software tool which links your software to HMRC software

3   Arrange for websters to check or prepare your VAT return and then we will submit to HMRC using our links.

How can websters help?

websters has been supporting clients with an Online Accounting Service since 2003. known as WebsterAccounts. So we have very many years of experience with the approach which has become the HMRC preferred option. Throughout that time we have given the client the support to operate in the way which suits them best. Some choose pay for us to take the tasks away from them – others prefer initial support to then be able to operate on their own. That choice will remain.

Your Account Manager can give you support in whichever way you want to proceed. Unfortunately, the cost of this additional advice cannot normally be included in the annual accounts charge that you have been used to paying. However, most clients who have accepted our help to train them to keep better records with modern tools save money in the long run – because their accounting becomes easier.

I currently keep my records on paper what will I have to do?

You will be facing the biggest change. You have two broad choices.

1   Change over to a computerised software tool that suits your needs

2    Keep using the same system but engage websters to prepare your accounts on one of the online tools. Over time we can train you to gradually take more control yourself if that is what you would prefer.

Speak to your account manager about the best solution for you.

I currently use a spreadsheet to record all my transactions. Is that enough?

A spreadsheet qualifies for MTD provided that you can export to HMRC  – so with the right bridging software you will be able to submit your own returns. There are a variety of suppliers selling spreadsheet based bridging software. If you want to use this approach to submit your own VAT returns then buy one of the packages – see our notes below on our views on a variety of software tools.

Alternatively, you could provide websters with your spreadsheet each quarter for us to review and then submit with our bridging software. Speak to your Account Manager for pricing.

I am a Xero or Quickbooks etc user. What do I have to do?

These two and other packages are said to be fully compliant with MTD. Just make sure that you are using the in-built VAT submission tool – rather than any other solution – e.g. manually entering the data to the HMRC website.

If you are unsure whether your software is MTD then check this link

If you need any help with this then speak to your Account Manager.

I am a Sage user – will I need to change the way I work?

Sage accounting software is not a single product. Our understanding is that most of their range will not support MTD and there is an upgrade option which involves additional cost. Check with Sage or on the HMRC link for your particular product.

I am a WebsterAccounts user what will change?

You should notice very little change. We will initially link our software with HMRC using bridging software from our tax software supplier. We will develop the direct link in the near future if this seems valuable. We will contact you shortly before the deadline to confirm the exact details of how to submit to HMRC.

I am under the VAT threshold what should I do?

HMRC are encouraging all businesses to migrate to using software which would qualify under MTD. It is likely to become compulsory in the future so many would benefit from making the change now. However, any Brexit would probably tie-up most of the HMRC software development budget for the next five years so only make the change if it is of benefit to you.

Usually, year end is the best time to change accounting software – but if you become liable to register for VAT

Do websters have any preference in the software tools?

For bridging software quite a number of independent software engineers have built a tool and are trying to sell them. Check the Excel Apps store. Most are not expensive per submission and one may be offering the software for free. Our concern with all these tools is whether they store your data. It is very likely that some will not make enough money to be continue selling. Make sure that you keep your own record of the returns submitted. We are using the bridging software from the firm which supplies our tax software but as far as we are aware this is not available to sell – but that could change over the next few months.

The choice of accounting software is highly controversial. We can honestly say that there is no one accounting software tool which is universally loved by all our accountants. If you compare any of the established online accounting solutions with software for (say) the games industry – then all of them leave much to be developed in the future. Having built our own software we are quite open that it is not right for all businesses – but it does everything that most need. Gary Eves is its biggest fan and has used it for his clients for the last 10 years. Xero is the preferred choice of several of our accounting team dealing with busy small businesses with lots of transactions which can be imported via the bank feed. Sage is preferred by others especially those dealing with our largest clients – as the integration for the final accounts is more convenient for larger businesses where the reporting requirements are more defined.

All our existing clients have a free choice – which we are happy to support. There are over 100 software tools being sold.  So if the choice of tool is important to you – then make your choice and we will support you. If not then ask your account manager for a suggestion.

We are open minded as to whether Xero can maintain the position as the most fashionable brand. There are other big players in the market who may be able to release new features which help capture a significant market share. That is why we are not linking our whole practice to one tool as some firms have done. Spreadsheets will continue to have a role for many smaller businesses.