Making Tax Digital quarterly updates with VT Transaction+

I’ve just sent in my first successful quarterly update with VT Transaction+ .

I had to sign up for Making Tax Digital with HMRC first.

The first time you use VT Transaction+ for MTD, there is some basic setup to do. All MTD settings can be accessed by clicking the “MTD” option on the top bar.

The first stage in the setup is to confirm details of your business and authorise the software to connect to HMRC. You’ll need to:

• Tell the software what type of legal entity your business is. Currently Making Tax Digital only applies to sole traders.
• Check your business name and address
• Enter your NI number – and, if you’re VAT-registered, your VAT number too
• Click on the grant authority button to connect VT Transaction+ to HMRC

The next stage in the setup is to check your quarterly update settings:

• Go to the “Options” section to confirm (1) whether you will be sending HMRC your quarterly figures on a tax month basis (eg, 6th April to 5th July) or on a calendar month basis; and (2) whether your income and expenditure is recorded on a cash basis (money in/money out) or an accruals basis (keeping track of unpaid invoices).
• Toggle the “Short / summarised form” option on or off, depending whether you want to give HMRC a breakdown of your expenses by category (select “off”) or just the total (set it to “on”)
• Go to the “Assign (or exclude) accounts to tax categories” section and check that each category in your accounts has been assigned to the correct box on the tax return.

The business and software setup can be done separately, or at the same time. Initial setup might take an hour or so.

Next, the quarterly submission.

• Check the closing bank balance(s) to make sure all income received and expenses paid have been included.
• Review the transactions in each category to make sure everything looks OK. You can do this by selecting “Display breakdown of tax category” from the side menu and clicking on the name of each Account (in blue).
• Putting in accounting adjustments is optional. It gives you a better idea of how your business is doing if you do put the adjustments in, but you don’t have to.
• Submit your quarterly update. It takes 1 second. Literally.

To view a summary of where you are with MTD, go to the “Income tax obligations” section of the software, and click on the tab for the tax year you’re in. The summary lists, by tax year:

• The status of every quarterly update (submitted or not yet due)
• The date the quarterly update was submitted
• The due date for any quarterly updates not submitted

In conclusion, whilst the user interface won’t win any prizes for aesthetics, VT Transaction+ submits and manages quarterly updates to HM Revenue & Customs with the minimum of fuss in a matter of seconds.

Note: VT can only handle quarterly updates. You (or your accountant) will need separate software to submit your MTD tax return.