Are you unsure whether to use Making Tax Digital software or spreadsheets for your tax returns?
For businesses wanting to continue using spreadsheets, we outline the benefits vs the disadvantages.
What is Making Tax Digital (MTD) for VAT registered businesses?
All VAT registered businesses must now submit their returns digitally to HMRC using compatible software to comply with MTD.
You can find out more about MTD compliant software, training and support on our site.
But many companies have been using spreadsheets to record their financials rather than switching to Making Tax Digital software.
Can you use spreadsheets to submit VAT returns?
Now that Making Tax Digital (MTD) is in force for VAT registered businesses, many business owners ask the question if they can continue to use spreadsheets to record their financials.
Whilst the short and sweet answer is yes, you can continue to use spreadsheets for Making Tax Digital, the process of getting the information to HMRC will need to change as bridging software will need to be used.
The current process of manually entering information from a spreadsheet into the Government gateway online will no longer be allowed. All information must be sent to HMRC digitally and bridging software will need to be used if you still wish to continue using spreadsheets for your financial records.
What is Making Tax Digital bridging software?
If you continue to use spreadsheets, MTD bridging software allows the information contained in a spreadsheet to be sent to HMRC in the correct format. This is done via a digital link.
Once you have saved your spreadsheet on your device, you need to use a Bridging supplier and set up an account with them. You then upload your spreadsheet to your bridging supplier where the relevant information will be read and populated into an API enabled VAT spreadsheet. Once you have reviewed the information is correct, it will be submitted to HMRC via a digital link.
However, it’s not as simple as it first sounds.
The disadvantages of using spreadsheets for MTD
All your information contained within your spreadsheet that you wish to submit to HMRC will need to be in a specific format or it will not be accepted. This is where mistakes can happen, and much time can be wasted trying to get it sorted.
Errors in information
According to some reports, a staggering 90% of spreadsheets contain errors! This is due to entries being overwritten by mistake and being difficult to immediately spot errors.
Data is not automatically updated in real-time.
Manual reconciliation needs to be done which is time-consuming and again can lead to mistakes.
Data can be lost.
Files can be deleted in error or not saved to the latest version resulting in a duplication of efforts to bring information back up to date.
The time spent sorting out these, quite often costly, mistakes could have been avoided if using MTD software.
The benefits of Making Tax Digital software
Whilst very small businesses or those that cannot handle technology may still opt for using spreadsheets, they will miss out on the benefits of proper accounting software like Xero or QuickBooks
In our opinion it takes no more time, and often much less, to enter data into Xero rather than into a spreadsheet. And the beauty of using MTD software is that you get all the additional benefits that are not available with excel.
The benefits of MTD software are:
- Fewer errors
- Management accounts so you can see how the business is doing and react quickly when change is needed
- Monitor KPIs and other vital business data
- Better credit control with automated statements
- More financial control
AT Maynard Johns Chartered accountants, whilst we advise using MTD compatible software we can cater for your individual needs.
If you wish to continue to use spreadsheets, we can do your MTD returns using our in-house bridging software. And if you wish to transfer your records and use Making Tax Digital software, we have set this up for you.
To discuss your MTD needs, whether using MTD software or spreadsheets, get in touch with Maynard Johns Chartered Accountants now on 01237 472071.