What is bridging software?

A bridging software connects business records with HMRC's digital systems in a way that is compatible with Making Tax Digital (MTD).

MTD, the government's initiative to digitize VAT returns, requires affected companies to submit their returns digitally. MTD is not possible if you use spreadsheets to keep track of your records and then manually enter these into the Government Gateway.

There is various cloud accounting software, offers a single solution for managing and submitting MTD recognized business accounts. For businesses that want to maintain their records through other methods such as spreadsheets to be compliant, additional software is needed.

Bridging software links data from spreadsheets to HMRC's portal. This link allows you to submit the data digitally making the VAT return compatible with MTD.

Bridging software is not sufficient to fulfill MTD's other requirements, including digital record-keeping, maintaining digital links between data, and digital link maintenance. Additional calculations may be required by your accountant to convert spreadsheet data into bridging software format.

 


What options are there to make my taxes digital?

There are several options under Making Tax Digital rules that will allow you to submit your VAT return directly to HMRC. One of the most important rules is that your VAT returns must be submitted online. For people who still use spreadsheets, you can submit the VAT return online using external bridging or by directly accessing online invoicing.

This is where the distinctions between Excel spreadsheets and online Accounting Software, as well as the need for bridging programs, are made.

Who will need bridging software to Make Tax Digital

If you prefer not to use an internet accounting solution, but still need to use spreadsheets for your accounting requirements, then you will need a way of communicating information for your VAT return online to HMRC. This is due to the Making Tax Digital scheme,

Bridging software acts as a mediator (sort of like an interpreter) between your Excel spreadsheet, and HMRC’s portal to submit the VAT return online. HMRC's Making Tax Digital initiative requires all taxpaying taxpayers to keep digital records. This allows them to submit their VAT return online. To be compliant, electronic records that you keep must be digital. Also, the VAT return that you submit must easily be read by HMRC’s software.
 

How to use Bridging Software and what it might cost?

HMRC cannot provide any bridging tools for their customers. Instead, third parties are used to fill the gaps. A side effect of this is that nearly all bridging programs provided by these third-party vendors will be costly, either as a one-off fee or as a monthly subscription.

What are the potential negatives of using bridging programs?

Spreadsheets cannot be used for accounting and still comply with Making Tax Digital regulations without bridging software. These limitations must be considered by third-party vendors offering bridging technology solutions. The software solutions seem to be useful, but it's difficult to predict how many users will use them.

Each person has their way of working with Excel spreadsheets. Some users only need basic functions. Others have designed their Excel-based system that includes many macros. The question is whether these bridging programs can manage data that has been altered in certain ways with functions and macros. And how will they keep it accessible to HMRC's portal?

HMRC may be able to provide a standardized template that can be used in Excel and bridging to solve the variation problem. This will allow for a lower error rate when uploading a VAT return via the internet. Online accounting software as an option to bridging software vat. 


Online accounting software cuts out the middleman between HMRC and you while making it easier for you to adhere to Making Tax Digital rules. If you are intrigued or comfortable with the idea of moving from Excel for your accounting purposes, you can find out more information in our moving to online accounting post. 

Related Searches:

What is Digital Tax Software and What Types of Software Are There
 

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