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[14.10.2019]

DNG Question Time – Should I use ‘free’ MTD software?

 

Welcome to the second in our series of blogs based around questions we are frequently asked. To read last weeks blog on outsourcing click here. This week we will look at the potential pitfalls of ‘free’ Making Tax Digital (MTD) software.

What is Making Tax Digital?

Making Tax Digital is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC wants to be one of the most digitally advanced tax administrations in the world – improving efficiency, effectiveness and ease of compliance. The process is well underway, with businesses and accountants putting systems in place to improve efficiency, boost profitability and make the transition painless.

From April 2019 VAT registered businesses with a turnover greater than £85,000 should no longer log on to the Government Gateway and manually submit VAT returns. Instead returns should be uploaded via ‘functional compatible software’ each quarter.

Why should I pay for MTD software when there are free options?

There are a number of ‘free’ MTD software solutions allowing you to upload your VAT returns to be MTD compliant. These include bridging products, which is software that links to Excel so it can pick up the figures for your return and submit them through the HMRC portal.

A recent survey by Absolute Accounting reported the following from users of ‘free’ MTD software:

  • Users asked to pay to continue using software after filing three quarters returns for free
  • Users being advised that the software is not being supported or updated going forwards
  • A number of people have said it took several attempts to file their returns
  • ‘Free’ software often tends to be fairly basic, and may allow you to upload your tax return only, but will not offer all the additional benefits you can gain from using paid accounting software
  • The free software was only rated ‘ok’ to use and not ‘ good value for money’

Cloud accounting software such as QuickBooks and Xero and paid bridging software such as Absolute Excel VAT Filer is relatively inexpensive and when you consider what you could gain back in time and quality financial business information it can really start to make sense.

What can I gain by paying for MTD compliant software?

Cloud accounting software offers a multitude of benefits in addition to ensuring you are MTD compliant. It can save you time by automating processes and gives you access to up-to-date valuable financial information on your business, allowing you to make informed decisions to move your business forwards at any time. In next weeks blog we will explore the benefits of cloud accounting software in more detail.

While paid bridging software will not offer the additional benefits cloud accounting software does it means you can continue to keep your records in Excel and file them in a MTD compliant manner without the problems ‘free’ software can encounter.

Contact us to discuss your business’ Making Tax Digital and software needs.   

Andrew Clifford

 

 

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