HMRC's estimates of the number of businesses who are able to submit their VAT returns directly by using third party software are inexact, but it seems that the vast majority (somewhere between 87-92% of businesses) submit their VAT via HMRC's portal. The main problem being difficult adjustments required and/or the need to combine data from several sources. 

MTD becomes compulsory for VAT registered businesses from April 2019 whilst for corporation tax it has been deferred until 2020.

Looking at the statistics as they are, nearly 87% of VAT registered businesses now need to start considering how to adjust their record keeping and software requirements ahead of the 2019 deadline. Any changes will need to accommodate MTD requirements for other taxes such as corporation tax, but as these haven’t yet been determined by HMRC this is proving challenging. Brexit also represents a massive challenge for any business with cross border activity.  

Clarity is needed as soon as possible if businesses are to be ready by April 2019 which is now less than 18 months away. 

VAT and software: the challenges


The majority of software packages are so complicated that your average user is not permitted to make changes: in fact some software only has 'accountant areas' these allow an accountant to correct data input errors.

A review of software forums indicates a wide spectrum of user ignorance in accounting be it in entering opening balances when setting up software to understanding when and if a control account is required and if so what to do if a balance does not balance.

Businesses of all sizes use many different types of software and systems, and some are more convenient than others: it may be faster to enter petty cash onto a spreadsheet than have a junior member of staff log in to your accounting system and enter each receipt on a line by line basis.

Partially exemption, Flat rate schemes, cash accounting, capital goods scheme and EC sales lists all require careful consideration and the danger is that a user accepts what software says without checking that the result is correct.


Software all requires a user licence, updating and some kind of help-support system: its not as cheap as it could be.

Businesses that are not currently using software for accounting will need to invest a lot of time in setting up appropriate systems.

HMRC appears to have abandoned its original proposal to provide free software.


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