Making Tax Digital - Bridging software

Can we still use spreadsheets after MTD comes into force?
One of the most commonly asked questions concerning the Making Tax Digital changes coming in from April 2019 concerns whether spreadsheets count as “functional compatible software”.  The answer to this is both yes and no.

“No” in that a simple standalone spreadsheet in isolation is not going to be permissible, but “yes” in the sense that you can use a spreadsheet for keeping your VAT records provided that a piece of “bridging software” is also used in order for it to be able to submit the relevant information to HMRC.

Bridging software is going to be important solution for businesses where all or any of the following criteria apply:
  • The business is partially exempt and needs to perform complex calculations outside the accounts package;
  • The business is part of a VAT group;
  • The business already uses bespoke software which is not currently MTD compatible;
  • Business owners are not confident at moving from spreadsheet or manual records and so do not wish to adopt a full accounting software solution.
What is Bridging Software?
Bridging software is a piece of software that can communicate with HMRC’s systems for Making Tax Digital purposes and allows the relevant information to transfer through to HMRC from a spreadsheet format.
Bridging software in essence will replicate the look of a VAT return and it will be incorporated into the spreadsheet workbook that the business records are recorded in.

The user will link the VAT return boxes from the bridging software to the relevant figures in the business records and once completed, the MTD/VAT submission can be made using the appropriate login and passwords for the Government Gateway.

As the links between the business records and the submission to HMRC are digital, this means that the process is MTD compliant.  It is distinct from a situation where figures are kept within a spreadsheet which is then manually keyed into the Government Gateway to submit the VAT return (which is not MTD compliant).

Options for Businesses Considering Bridging Software
Whilst, where possible, we believe that migration to a full cloud-based software package is the right step for most businesses in terms of ensuring compliance with the new Making Tax Digital regulations, for some businesses bridging software and spreadsheets may be the only practical solution for the foreseeable future. 

There are a number of different options currently on the market, including: 

Tax Optimiser
Absolute Excel VAT Filer
Tax Calc

Prices start from around £30 to £40 per year. Other providers have indicated that they are currently developing free bridging software, but haven't yet made these available to use. 

If you need any further advice about compliance with the Making Tax Digital for VAT regulations, please contact your usual Moore Stephens adviser.