Clive Murphy Ltd.

Making Tax Digital

Changes to the Tax System for Small Businesses

Making Tax Digital (MTD) for VAT began on 1 April 2019. From that date VAT registered businesses with a turnover above the VAT threshold (currently £85,000pa) need to:

  • • keep their records digitally from at least the start of the first VAT period beginning on or after 1 April 2019, and
  • • file VAT returns for all periods beginning on or after 1 April 2019 to HM Revenue & Customs using MTD compatible software

Some software companies have used this change as a great opportunity to sell on-line bookkeeping software, usually charging subscription fees of £10 - £25 a month. Whilst this type of software can be useful for some businesses, it is relatively expensive and can be complicated to use. This type of advertising needs to be treated with some caution.

In most cases I would recommend small businesses (what the government would call micro businesses) to continue to use spreadsheets for bookkeeping purposes. The VAT returns can then be filed with HMRC on-line by using bridging software. Bridging software currently costs around £36 - £40 a year for a single business, so this approach is much cheaper, and most micro businesses find a spreadsheet easier to use than cloud bookkeeping packages.

A long list of MTD for VAT compatible software can be found at: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat

I use Neilson James Technology which can be found at: http://www.neilsonjamestech.co.uk/

If you do need double entry bookkeeping, I would suggest using VT software. They offer a cash book version which is free apart from the MTD components. VAT returns can be filed by either purchasing the MTD components, or alternatively by using compatible bridging software such as the Neilson James Technology software mentioned above.

Issues to consider when selecting software include:-

  • • Ease of use.
  • • Cost. If a cloud bookkeeping system is to be used, the level of complexity would probably demand a long term commitment so the risk of future price increases needs to be considered.
  • • Continued access to the records. There is a legal requirement to retain VAT records for at least 6 years so if continued access to the information isn't available, there is a risk of becoming locked-in to a particular software system.
  • • Will your accountant be able to freely access the data.

For many micro businesses I expect a spreadsheet + bridging software approach will prove the simplest and cheapest option.

MTD for other taxes will not commence until 2021 at the earliest.

Further information about MTD can be found at:-

Please note that businesses with a turnover below £85,000pa do not need to file VAT returns using MTDforVAT, and can continue to file returns in their usual (old style) way.

Once a business registers for MTDforVAT it cannot go back to the old system. So it is important not to register for MTDforVAT until all old style returns have been filed.

Mac Computer users

MTDforVAT causes additional problems for Mac computer users as almost all bridging software is designed to run on Windows computers. One possible option is: https://vatmtd.com/

If you can export a Numbers or LibreOffice Calc spreadsheet in Excel format then there are a number of cloud based options for filing the MTD information with HMRC; and for clients of mine it would be possible to e-mail the spreadsheet to me so I can file it for them.

Free initial consultation with no obligations.
To arrange an appointment, you can either email me or call (01752) 822975 between the hours of 9am - 5:30pm Monday to Friday.

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