A guide to choosing the right digital tax software

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Image Credit: Shutterstock

Since the Government announced in its 2015 Budget to ‘end the tax return,’ as we know it by digitalising VAT from 1st April this year, a number of accounting software providers have sprung up to offer special features and discounts to entice new customers. 

Fast forward to 2019 and the Government hasn’t quite delivered on its promise, announcing in the recent Spring Statement that it will not extend MTD to income taxes and corporation taxes. However, companies will still need to enrol into MTD by August, with some of the requirements of MTD for VAT applying from 1 April, and with so much MTD software to choose from, how do you know what’s the best application for your business? 

Compliance and ease of use 

First, check that the software is HMRC compliant for MTD as you will be unable to file your return unless it is. The software provider should clearly state that it is compliant or you can check the HMRC approved list of providers here. When registering for MTD you will be required to also link your software to HMRC and give authority for your software to transmit the data to HMRC.

Request to trial the software first. Some programmes are much easier to use than others and so the best one to suit your business will be dependent on the user’s level of technology maturity. The more user friendly the better as some may not be suitable for your business or experience. Programmes such as Quickbooks and Xero are easy to use and quick at drilling down and finding data and transactions, saving huge amounts of time when compiling end of year reports or VAT submissions. You can also easily scan via your phone and attach purchase orders, receipts or expenses - which is useful when trying to find historical evidence behind certain transactions. 

Image Credit: Pexels

Image Credit: Pexels

(Image: © Image Credit: Rawpixel.com / Pexels)

Training and support 

Utilise the provider’s help centre. Most software providers offer online FAQs, and online or email chat to help resolve problems or answer question, but few offer a phone helpline. For those less tech savvy who may not know the correct terminology to search for, or to ask about, then software such as Quickbooks is particularly good as you can speak to a live person to swiftly resolve issues and reduce frustration. 

Check what user training the software provider offers, as this is critical to getting to grips with the software quickly and to reduce the possibility of errors. Check if your local accountancy firm hosts any training seminars or webinars as they will guide your through the software processes.

Pricing and add-ons 

Be wary of hidden costs and discounted incentives for the first two to six months subscription period. All software providers offer a basic rate of around £20 a month for their standard functionalities typically including purchase, sales and nominal ledgers (profit and loss and balance sheet) and basic level VAT calculations. Unlike other software which may charge an additional fee, Quickbooks for example, includes the ability to process in foreign currency as standard. Always check first to see what your business requires before deciding on the best software. 

If you’re currently using software, don’t assume that the upgrade quotes given by the software provider or accountant, are fair. Speak to other providers and — if you do want to stick with the firm you currently use —challenge them on price if necessary.

Image Credit: Shutterstock

Image Credit: Shutterstock

(Image: © Shutterstock)

Bridging software 

All MTD software are cloud based apps so they can be connected through other digital devices, making them accessible and increasing their functionality and flexibility. If your company uses an external expenses programme such as Expensify or Concur, then check it can sync with your MTD accounting app. 

If you plan to continue using spreadsheets, you’ll need to use a bridging software application to submit your return. The data will be extracted from the spreadsheet and upload into HMRC’s MTD platform. The spreadsheet will need to be either API enabled or used in combination with an MTD compatible software product so the data can be sent to HMRC. Companies will only be able to do this for 12 months before having to fully digitalise and not all software providers have bridging software making this merely a temporary stopgap. 

Penalties

HMRC can potentially charge a penalty for failure to keep the required VAT records and can issue a penalty up to the value of £500. However, HMRC has introduced a ‘soft landing’ to make allowances where a company has made reasonable efforts to comply. 

No surcharge is payable if the VAT liability is paid by the due date, but the current surcharge process will still operate – making it more important than ever to ensure you’ve done your homework and you have the right software provider in place so you’re MTD ready for your VAT return from April.

Mandy Chubb, Head of Management Accounts Team at Goringe Accountants