What is Bridging Software for Making Tax Digital and when to use it

15 Mar 2019  |  
Tags: Outsourcing
what-is-bridging-software-for-making-tax-digital-and-when-to-use-it
Are you an accountant or bookkeeper wondering if Bridging software is right for your clients’ VAT returns? In this article, we will explain what Bridging software is, why you might choose it over other Making Tax Digital (MTD) compliant solutions, what’s available in the market, and how much will it cost you.

What’s Bridging software for Making Tax Digital?

Under MTD (which comes into effect 1 April 2019) you must keep all your clients’ VAT records in a digital format and submit VAT returns through HMRC approved, MTD compliant software. One way of doing it is by using software like Xero or Intuit QuickBooks online.

But there is another solution: Making Tax Digital Bridging software.

What is MTD Bridging software?

As the name suggests the software acts as a bridge between digital spreadsheets and HMRC’s Government Gateway. In simple words, you keep your client records in spreadsheets like Excel or Google Sheets. Then, you use bridging software to submit the final figures for each of the 9 VAT boxes to HMRC. This ’bridges’ the gap between digital systems that are unable to connect with HMRC directly.

However, for the software to be compliant with HMRC, it must pull all the figures from the spreadsheets. There needs to be a digital link between HMRC’s Government Gateway and the spreadsheet. This is done via HMRC’s API, which stands for Application Programming Interface (API) Basically, an API specifies how software components must interact, providing the digital link element of the MTD regulations.

All this means, from April 1, you won’t be allowed to type in the final figures for the 9 VAT boxes like you could do with HMRC’s VAT portal.


Why you might choose Bridging software instead of other MTD software?

An excellent question. We have been working closely with accountants to make sure they are fully compliant when MTD arrives on 1 April 2019. We have learnt a few things:

1. Many of their smaller clients are resistant to moving away from spreadsheets. This is because they understand spreadsheets and look at it as a familiar application.

2. Some accountants have clients who make very less use of technology and don’t want to extend the capability of their software as they are worried about the cost of MTD compliant software.

3. Accountants, in large numbers, are supplementing their desktop software with low-cost software programs that work in conjunction with Excel.

4. Some accountancy practices use a range of software systems, especially when handling complex VAT areas. Such systems are difficult to integrate and a bridging software seems the likeliest of tools to take their outputs and make VAT submissions.

5. Many accountants don’t have access to resources who are trained and experienced in cloud accounting software packages such as QuickBooks and Xero.

For these type of situations, spreadsheets seem like a good option. By using bridging software, accountants will be able to solve their client’s problems, even when the situation gets a bit tricky.

Why Bridging software might not be a long-term solution?

To help your clients’ get up to speed, HMRC is relaxing the rules regarding digital linking for the first year of MTD for VAT for businesses.

They have started to call this period: ‘soft landing’. During this period bridging software will be able to use processes that are only compliant in the short term. For example, screen scraping - digitally collecting screen display data and translating it so it can be stored - is acceptable for the first year only.

Post-April 2020, there must be full, end-to-end digital linking. It’s important that you check with your bridging software provider if their solution will be compliant in 2020.

Which Bridging software systems are available in the market?

There are numerous ‘bridging’ software systems available. Some of these have been listed below:

• Xero bridging software
• Avalara MTD filer
• BTCSoftware
• Quickbooks Bridging software
• Absolute Excel Vat Filer
• Liquid VATFiler (free for single users and single company entities)
• VT Transactions+
• PWC bridging software (free for charities)
• VitalTax (first year free for agents) 
• ClearBooks
• Thomson Reuters
• TaxCalc’s VAT Filer app

For more, check out the list of Making Tax Digital software on the Gov.uk website.

What are the costs of Bridging software?

The costs of bridging software vary from one provider to the other. It’s easy to find loss-leader models who basically provide a certain level of free access in order to draw in new customers so they can offer other services.

Most solutions are around the £50 to £100 a year mark. So there is actually no need to hit a jackpot and huge spend huge sums of money on new software.

How is QXAS supporting accountants and bookkeepers?

QXAS provides people resources to help accountants and bookkeepers cope with the increased admin that Making Tax Digital for VAT has created. We are proud to say that 50+ of our 250+ accountants are certified in cloud accounting packages such as Xero and Quickbooks, and over the next few months, we will have all our 250+ staff certified and ready to support you with digital record-keeping and the review and filing of quarterly VAT returns.

We provide three types of solutions to help our accounting clients get ready for MTD. You can read more about it here. Throughout March we are also offering free* MTD software for accountants. For more details book your free 1-2-1 consultation.

So if you are an accountant and bookkeeper, give us a call and we could help you meet staff shortages, reduce MTD for VAT costs, and have your practice ready in no time. Call us on +44 845-838-2452 or request a callback by emailing contact@qxas.co.uk