Making Tax Digital (MTD) has finally arrived and marks a new era in HRMC, which plans to become an advanced tax administration the embraces digital technology. The goal for MTD is to make tax processes easier, faster, and more efficient for both businesses and HRMC.
MTD currently applies to VAT-registered businesses with a taxable turnover above the registered threshold (£85,000), although will eventually include self-assessment and corporation tax. This means all businesses and accountancy firms need to be using MTD compatible software to store tax records and file taxes, with various software solutions currently available from vendors.
Here are some tips for choosing the best MTD compatible software:
Make Sure it is Compliant
This may seem obvious but always ensure that the software is MTD compliant! There are several functions that the software needs to do, including storing and preserving digital tax records, creating VAT returns using digital tax records, filing VAT returns to HRMC, and sending and receiving tax data (and other info) to and from HRMC using an API (application program interface) platform.
You do have the option to use more than one software solution for this, which is especially important for businesses using practice management software that are storing patient data along with their tax data.
Know Your Software Options
There are a few types of software solutions available for businesses, including cloud software and desktop software. Each one has their advantages, so consider what you need from the software, whether there are additional features you could benefit from, and what is within your budget.
For instance, cloud software involves storing all data online in cloud networks. You can access this on any device with an internet connection, making it a good option for larger enterprises that want to work on taxes off-site. It’s a popular option for accountancy firms due to the large capacity, speed, efficiency, and flexibility of the software.
Desktop software involves storing the software and all data onto physical computers. This means you need backups made of all data and will need to always use it on-site, while any repairs or updates need to be done manually too. IT departments can handle much of this work, although not all businesses have access to such resource options.
Consider Bridging Software
Bridging software is an alternative to buying a completely new software package, making the jump to MTD much less complex and easier to come to grips with. For example, HTMC has listed bridging software solutions that can be combined with current software packages to make them MTD compliant.
For instance, if you currently have accounting software that is not MTD compliant you can use a bridging software to bridge the gap. If you only use spreadsheets then a bridging solution is a great way to make sure you’re MTD compliant without buying new software solutions.
How User-Friendly is it?
It’s recommended that you choose MTD software that is easy to use - or easy enough to learn! Again, having an IT department may minimise the importance of usability as they can learn how to use and manage the software and provide subsequent training, although you want to ensure the vendor offers some form of training.
Accountants also need to know how to use the software, so making sure it is something they can easily learn is important too. Most MTD vendors provide either on-site or remote training solutions, while some offer accountant-specific software that incorporates many other useful accountancy software features.