Following HMRC’s Making Tax Digital for VAT rollout, it’s time to get to grips with purely digital VAT Returns. Although the adoption of new systems can represent a steep learning curve, it can also provide an opportunity to embrace more streamlined methods – saving you both time and money in the long run. In any case, it's vital to ensure that you use the right methods for your business. In today’s article, we discuss the complications surrounding bookkeeping as VAT-registered business, and how VAT bridging software can overcome the challenges surrounding bookkeeping software.
Whether your business is new to VAT Returns, or you want to switch over to a more convenient system, read on below for the low-down!
What is bookkeeping software?
“Bookkeeping software” refers to the digital tool you use for maintaining your business’s financial records. Since HMRC rolled out MTD for VAT, it has been mandatory to store your finances digitally. This means you should already be using some form of software for your bookkeeping. There are many such tools available but the most widely known and used is Excel’s spreadsheet software.
Excel is often a great choice for many reasons:
- It’s familiar – most computer users have been familiar with Microsoft Excel for many years, and it has a trustworthy reputation
- It’s easy to use – Excel’s spreadsheet layout is very intuitive, and it’s easy to find data at a quick glance
- It’s free (or low-cost) – for many people, Excel comes pre-installed on their devices and is ready to go for free
- It’s available on any device – Excel is available on desktop, laptop and mobile devices alike, offering wide accessibility
- It’s connected to the cloud – Excel can be synced across devices, ensuring you always have a backup of your data
It's no wonder that business-owners gravitate towards this convenient spreadsheet software to record their finances. Unfortunately, however, Microsoft Excel is regarded incompatible with Making Tax Digital, as it does not have an interface to connect directly with HMRC’s VAT Return system. For business-owners wanting to stay in control of their own VAT Returns, this leaves only two options:
- Change to a different bookkeeping software
- Use VAT bridging software (and continue using Excel)
Changing to a different bookkeeping software can be a costly affair, requiring steep up-front or subscription payments. It can also necessitate investing a huge amount of time in transferring your data to a new system, as well as learning how to use and maintain it. Furthermore, it will require you to upload and store the entirety of your business’s financial details on a third-party system. Paying for this kind of inconvenience is something business-owners often want to avoid.
Fortunately, there is an alternative: VAT bridging software. This method provides a quick and easy solution, allowing you to continue your bookkeeping in Excel and stay MTD-compliant.
What is MTD VAT bridging software?
Bridging software is a simple and convenient system which enables you to continue using Excel for your business’s bookkeeping. It works by connecting your existing financial records with HMRC’s MTD for VAT system, “bridging” the gap between Excel and MTD compliance.
In a few simple steps, you can digitally link the necessary figures from your Excel spreadsheet with your online VAT Return. The great thing is that you get to stay in control of your financial data, only sharing 7 Excel cells with the bridging software (2 cells are automatically generated). After submission, you can access your VAT Return data any time, and receive real-time updates.
As a low-maintenance and low-effort system, bridging software is available for a much lower price – especially in comparison with purchasing proprietary bookkeeping software or paying an agent to file taxes on your behalf. Starting from only £8/month, bridging software is undoubtedly the most cost-effective and time-saving solution for your business.
Weighing it up: bookkeeping vs. VAT bridging software
As we have discussed, the most renowned data-manipulation software, Microsoft Excel, is not regarded MTD-compliant by HMRC. This means that you cannot use Excel alone for your VAT Returns – a stipulation that has caused issues for many business-owners who rely on Excel for their bookkeeping.
One option is to overhaul your business’s financial record-keeping, purchasing third-party bookkeeping software. This typically requires considerable time and money, detracting from your business’s core activities and introducing a new financial burden. It also requires you to share a huge amount of sensitive financial data with an unfamiliar third party.
Another option is VAT bridging software. Abratax, our low-cost MTD VAT bridging software, is a fully HMRC-recognised tool for connecting your existing Excel spreadsheet with HMRC’s system. After digitally linking your VAT data through our tool, you can submit your VAT Return directly and securely to HMRC and receive instant confirmation.
Even better is that we offer a free trial: why not register with AbraTax and make tax easy today?
