What Software Should I Use for MTDfb?
As explained in our other blog What is Making Tax Digital for Business? HMRC’s aim is to use technology to speed up the collection information about the tax affairs of businesses. Rather than asking businesses to file returns annually, HMRC will ask them to submit tax information quarterly or even monthly (in the case of payroll data).
As part of this initiative it will become law for affected businesses to keep their books using an acceptable digital platform.
What is an Acceptable Digital Platform?
If you were to continue maintaining your books in a handwritten book, this would most certainly not be an acceptable digital format. This is exactly the type of record keeping HMRC wish to see the back of – and for very valid reasons.
The use of Excel or Word would be a digital format and would enable you to comply with the rules compelling you to keep your records digitally.
The problem with Excel and Word, however, is that they do not possess the necessary technology to enable the quarterly upload of data to HMRC.
Consequently, it will be necessary for businesses to choose a third party piece of bookkeeping software that has been developed to communicate with HMRC on the MTD platform.
There are numerous such third party bookkeeping software packages but it is important to choose the right one. The reason for this is that MTDfb is a project that HMRC will roll out over a number of years in which more and more businesses and tax types will be brought into the fold.
The choice of software then, needs to factor in the supplier’s ability to continue to develop their software to remain compatible with MTD. Moving the bookkeeping records of a business from one package to another is a cumbersome thing to do, so it’s best to back the right horse from the start.
Stand Alone Software or Cloud?
Firstly, we would thoroughly recommend that you choose a bookkeeping software package that is in the Cloud.
You can find out about the benefits of a Cloud based bookkeeping package by reading our other blog entitled Top 10 Reasons To Rapidly Deploy Xero Cloud. Although the article is about Xero, the principles in it apply equally to any reputable and established provider of Cloud bookkeeping software.
In that article there is one advantage of Cloud systems that is not mentioned and that is that it greatly enhances your accountant’s ability to be able to interact with you and assist you – because with Cloud technology they will be able to access your data just as easily as you. This means your accountant is in a much better position to be able to help and assist you.
Stand-alone software (i.e. software that has to be installed on your computer) simply does not offer this advantage (or any of the other advantages in our blog entitled Top 10 Reasons To Rapidly Deploy Xero Cloud.)
If you need help understanding Cloud packages and why they are preferable to stand-alone packages, please contact us.
E. H. Taylors
Which Cloud Package?
Having accepted that a Cloud package is the best to use, our recommendation would be that you choose a package from one of the “Big 3” because these are the providers who will have the capacity, capability, and appetite to continue developing their packages to remain compatible with MTDfb.
The “Big 3” are:
If you need help choosing the most appropriate Cloud package for you and your business, please contact us.
E. H. Taylors
What if I Want a Stand Alone System?
If you decide to stay with a stand-alone system instead of going onto the Cloud, you will need to check with the software provider that the version of the software you are using will indeed be compatible with MTDfb.
You should not just assume that your software will be compatible. Please check with the provider.
Further, you need to make sure that your software will continue to be compatible with MTDfb as the requirements change. This may mean that you will need to sign up to some kind of annual “maintenance” package with the software provider in order to be eligible to receive the necessary software updates.
If you need help understanding whether your stand-alone setup will be compatible or will remain compatible, please contact us.
E. H. Taylors
Written by Antony Holdsworth Bsc (Hons) FCMA