Spreadsheets and VAT from April 2019

Making Tax Digital (MTD) is HMRC’s long running intention to make an electronic link with the accounting data of UK businesses. The idea is to draw in the data they need directly from your computers using links provided by your software developers for this purpose.

Which is fine if you are using accounts software that will accommodate these changes.

The first implementation deadline for MTD is 1 April 2019, when all businesses registered for VAT, and with turnover in excess of £85,000, will need to submit returns using HMRC’s MTD processes.

Certainly, the accounts software that we use to prepare and submit returns for clients will be approved for MTD, and in most cases will not require the use of spreadsheets. 

The reason for this post is to clarify what traders, who do use spreadsheets to prepare data for their VAT returns, will need to do in order to become MTD compliant. There are two basic groups affected:

• Businesses who use spreadsheets in place of accounting software, generally smaller traders, and

• Larger concerns, with complex VAT issues – perhaps with multiple branches and partial exemption rules to consider – who cannot undertake the necessary calculations without copying summarised data from their accounts software into a spreadsheet to prepare the actual numbers for their VAT form.

HMRC has confirmed that it is happy for traders to continue using spreadsheets in these ways as long as the process involves the use of “bridging software”.

HMRC does not want you to upload data from a spreadsheet if this disconnects the summarised information provided, from the detailed transactions that make up the return. In other words, they want the figures on your VAT return to be linked to the underlying transactions. They do not want you to cut and paste data and break this link. Which is where bridging software will be used to maintain these links.

We are seeing an increasing number of software companies offer this type of facility. If you are VAT registered, have turnover in excess of £85,000 and use spreadsheets to prepare data for your VAT returns, please get in touch so we can help you regularise your position for returns to be submitted after April 2019.