Intuit QuickBooks Small Business Index, December 2024
MAKING TAX DIGITAL
Making Tax Digital Bridging Software – what it is and when to use it
Wondering if Making Tax Digital (MTD) bridging software is right for you? In this article, we’ll explain what bridging software is, why QuickBooks has built its own bridging software and why it’s great in supporting Making Tax Digital for accountants.
What is Making Tax Digital bridging software?
Under MTD you must keep all your client’s VAT records in a digital format and submit the VAT return through MTD-compliant software. One way of doing that is to use HMRC approved software like QuickBooks Online. But there is also another solution – Making Tax Digital bridging software.
As the name suggests, this software acts as a ‘bridge’ between a digital spreadsheet and HMRC. In other words, you keep your client’s financial records in a spreadsheet like Excel or Google Sheets. Then, you use the bridging software to submit the final figures for each of the 9 VAT boxes to HMRC.
However, for the software to be compliant, it must be able to pull these figures from the spreadsheet. There needs to be that digital connection, so you can’t type them in, like you could on HMRC’s VAT portal.
Why did QuickBooks make Making Tax Digital bridging software?
Good question! We’ve been working hard to make QuickBooks Online fully Making Tax Digital compliant, so why build bridging software too?
The answer is you. We've spent a lot of time with accountants and small businesses up and down the country and we've learnt two things:
Not all clients were ready to make the switch from spreadsheets – even though that’s their accountant’s long-term goal
Some accountants have one or two clients on their books with specialist or complex accounting needs which weren’t supported by QuickBooks Online
By building Making Tax Digital bridging software, we’re able to offer accountants a suite of MTD solutions that solve for all their clients, even the tricky ones.
Is the Making Tax Digital bridging software separate from QuickBooks Online?
No, the bridging software comes as part of QuickBooks Online. When you submit a VAT return to HMRC, you can choose between using the standard MTD e-filing process, or the bridging software. The difference is, standard VAT e-filing uses data that’s held within QuickBooks, whereas the bridging software pulls in the 9 boxes from a spreadsheet of your choosing.
The good news is that by signing up to QuickBooks you’ll be able to access the bridging software and all the other advantages of QuickBooks Online – like sending and tracking invoices and automatic transaction categorisation. So it’s a great way to introduce QuickBooks to clients, even if they don’t use everything at first.
Which QuickBooks MTD solution should I choose for my clients?
It depends on the client. QuickBooks is flexible so you can literally decide every time you come to submit a VAT return! (Although obviously, if you wanted to submit using the standard MTD e-filing you’d need the financial data in QuickBooks already.)
That said, there are some cases where Making Tax Digital bridging software is the only solution. Check out this list to find out which type of submission is right for you and your different clients.
Updated as of 6 Feb, 2019
QuickBooks VAT e-filing | QuickBooks VAT bridging | |
|---|---|---|
VAT threshold below 85k | Yes | Yes |
VAT threshold above 85k | Yes | Yes |
Annual filers | No | No |
Quarterly filers | Yes | Yes |
Monthly filers | Yes | Yes |
Sole traders | Yes | Yes |
Companies | Yes | Yes |
Partnerships | Yes | Yes |
VAT group | No | Yes |
VAT division | No | Yes |
Standard scheme | Yes | Yes |
Cash accounting scheme | Yes | Yes |
Agricultural flat rate scheme | No | Yes |
Vat retail schemes and margin schemes | No | Yes |
Bespoke VAT retail schemes | No | Yes |
Point of sale retail scheme | No | Yes |
VAT retail apportionment scheme | No | Yes |
Direct calculation retail schemes | Yes | Yes |
Tour operations margin scheme | No | Yes |
The margin and global accounting scheme | No | Yes |
The margin scheme on second-hand cars and other vehicles | No | Yes |
Auctioneers' Scheme | No | Yes |
Domestic reverse charge procedure | No | Yes |
Capital goods scheme | No | Yes |
Personal exports scheme | No | Yes |
Funded pension schemes | No | Yes |
Registration scheme for racehorse owners | No | Yes |
Retail export scheme | No | Yes |
VAT refund scheme for museums and galleries | No | Yes |
VAT refund scheme for charities | No | Yes |
Flat Rate Scheme | No | Coming soon |
TOMs scheme | No | Yes |
Partial exemption | No | Yes |
We hope you’ve found this article useful. As you can see, keeping your VAT clients Making Tax Digital compliant doesn’t have to be hard. With QuickBooks you have the flexibility to sort all your clients with one piece of software.
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