Picking an MTD software provider
Choosing the right accounting software for Making Tax Digital is crucial. It will not only help ensure you’re fulfilling your compliance requirements, but will also allow you to reap the benefits of automation and digitalisation.
HMRC uses APIs (Application Programming Interfaces), which allow for the exchange of data between two software programmes. APIs have resulted in the creation of MTD compliant software for businesses of all types and sizes, including those in niche sectors.
Key things to consider:
- Check whether your current provider is MTD for VAT compliant by searching for them on HMRC’s list. You can also filter the list to show providers suitable for certain accessibility needs.
- It’s important to pick the most appropriate provider for your business, as getting this wrong can create unwanted disruption. For example, limited companies with employees may benefit from MTD compatible software that has payroll features, or that integrates directly with third-party payroll software.
- There are free options available, but be aware that these providers may not have the investment or resources to build out the best features for your business. Make sure you look at the additional features listed that could help you with general business management too. Xero, for example, offers a roster of features to not only help you manage MTD for VAT, but also to support you with running a healthy business overall. In the long-run, it may pay off to use a software provider who can fulfil the needs of your business as it grows.
Meanwhile, sole traders will need to select MTD software that is compliant with MTD for ITSA in time for its mandation from 2024. HMRC already has a separate list of compliant software for MTD for ITSA. The list is relatively limited but will soon be expanded as more providers confirm that they are developing tools. An equivalent MTD for corporation tax vendor list does not exist yet.