As you make the transition for MTD for VAT, there aer some question syou should be asking yourself: How you are going to file VAT returns on behalf of your clients or how are they are going to create and file their VAT tax returns if they have been submitting the returns themselves.
The most fundamental change is that VAT registered businesses will be mandated to use API compatible software via commercial bridging software or bookkeeping services to digitally submit accurate financial information to HMRC.
We have seen several ways that practices submit their VAT returns today. Some might process them through a bookkeeping product, while others use only spreadsheets to come to the nine figures only to then manually type them into the interface. Practices have also been using a hybrid approach of online bookkeeping systems and spreadsheets. We have even seen clients using spreadsheets to produce their own manual calculations, before typing the figures into HMRC’s service.
The good news is that complying with the new VAT filing process is straightforward. Why? Because spreadsheets remain acceptable for digitally capturing data and can be the logical first step to embracing digitalisation and bridging software can help you meet HMRC’s requirements while maintaining many of your current processes.
What is bridging software and how does it work?
Bridging software has been developed to fill the need of practices still wanting to use their spreadsheets and digitally file their VAT returns. Bridging software provides a digital link to transport data from one application to another. HMRC will not allow you to type data from another place into the API software – it must be automatically populated from data elsewhere. Bridging software, like Wolters Kluwer’s MTD end-to-end solution CCH OneClick, does this from your spreadsheet.
The bridging software should also be able to accept data back from HMRC which means you can confirm that your filing has been successful and HMRC has accepted the data. By building a digital bridge, you are not only complying with HMRC’s requirements to use API-enabled software, but you are able to continue using many of your existing processes using spreadsheets to make the adjustments and calculations needed before the bridging software pulls the filing data to HMRC.
What can you do now?
Get a head start with HMRC’s VAT pilot which moved into a public beta in October. Businesses who are VAT registered can voluntarily choose to submit their VAT returns via the new system. You will benefit from seeing how you will need to finalise your VAT returns and what solutions you should be using to file VAT tax returns before this becomes mandatory. Furthermore, you gain access to greater support from HMRC.
There has never been a better time to embrace digitalisation in the tax and accounting industry than now. MTD doesn’t need to be overwhelmingly complicated. With the right software partner at your side, it is a golden opportunity to embrace digitalisation and boost efficiency and customers loyalty.
Gartner* defines digitalisation as using digital technologies to “change your business models and provide revenue growth opportunities”. The move to digital goes beyond just using digital data and software. It is a real opportunity to change your processes and create new services.
Look at MTD as an opportunity to develop new revenue streams. Software can halve the amount of time to complete compliance tasks completed manually. Make a start today by looking at your processes and how you can take advantage of the digital efficiencies to offer additional services.
For example, validating and filing VAT returns for customers who have been reliant on HMRCs online interface is one option to consider. The options are endless with the right tools.
Ultimately, MTD is a transformation worth being prepared for. If the transition is handled correctly, MTD can transform your business with increased efficiencies, giving you the valuable time to grow your client base and capitalise on new revenue opportunities.
For a comprehensive guide to how you can make the transition to MTD as smooth as possible, visit www.wolterskluwer.co.uk/makingtaxdigital. It includes insight into understanding the impact on your processes, a wide-ranging checklist, communication and a transition plan. Keep this guide to hand as you prepare for April 2019.