On the list of everything you need to know about MTD, you’ll find that using tools that have been approved by HMRC is key. But with the transfer of private business data wholly into the digital realm, you might wonder: what exactly is MTD-compliant software?
It isn’t easy to meet HMRC’s compliance criteria. There are stringent standards in place, meaning that any accounting software classed as such is certainly a platform you can trust. Here, we detail the requirements that they have to obey by, as well as the best MTD-compliant software out there…
Firstly, the software should be able to document all your business details, along with the relevant transactions, for a period of up to six years. For MTD for VAT, every transaction inputted must relay the date, as well as the information relating to any VAT paid or withheld.
Using your revenue and outgoings, the tools should then accurately calculate the VAT owed. The VAT return needs to then be submitted from the MTD software to HMRC through an application programming interface (or API). This is a direct link to their digital system.
Bridging software is available for those who wish to use alternative methods like spreadsheets. Although it doesn’t connect directly to HMRC, it can still be compliant with their requirements.
It will need to maintain an end-to-end digital path. Therefore, each piece of software should be digitally linked in order to ensure this journey is formed. This means that no data can be rekeyed, or manually cut and pasted. For example, cell links are classed as compliant if there is a formula in one sheet that reflects the source’s value in another cell.
Whilst a complete digital journey is required by HMRC, they are being lenient with their rules for the first 12 months. This is referred to as the ‘soft landing period’ where bridging software can employ short-term compliant processes, such as screen scraping.
Although the MTD software needs to successfully undergo the Making Tax Digital for VAT test environment, to be used effectively it should also function to your specifications too. If the one you pick requires the use of multiple products, for example, it could become a source of administration frustration.
The software should ideally be straightforward to use. Getting your tax affairs in order digitally is much simpler if there is easy integration with other software, as well as one-time-only data entry. Additionally, if you’re planning to grow, then scalability is a great feature to have.
These are just some of the elements that Liquid’s VAT Filer offers to make our software the most compatible with your needs. And, on top of this, it’s on HMRC’s list of compliant, approved Making Tax Digital software providers. An additional bonus is that it offers two-way communication with HMRC, meaning you’ll immediately know that your tax has been submitted successfully.
To get your digital journey into VAT started, discover more about our Filer today. For further information around compliant MTD software, give our team a call today on 0161 413 5050 or email firstname.lastname@example.org.