Year one of Making Tax Digital (MTD) for VAT (the “soft landing period”) ends this April. Firms may be using bridging software, provided by their IT supplier, to meet electronic VAT filing requirements. Soft landing was only ever a temporary measure. It does not deal with other elements of MTD like digital record keeping.
Entering year 2 after April, firms can face a financial penalty if HMRC considers a practice has not been making enough of an effort to comply with MTD.
What does this mean for law firms?
Firms operating the oldest systems are most likely to be at risk of a penalty, and may now consider their next steps. Software developers are investing in their current platforms, making them MTD-compliant. A developer would like to migrate all its legacy customers to its current platform, but is that the right decision for a firm?
There may be a gap of many years between IT systems from the same supplier and no commonality between them. A firm is advised to look at the whole market and not just take the word of its existing supplier.
Firms invited by their supplier to upgrade are advised to:
- Understand the time needed to plan for a new system. The average time from an old system to new is 3-6 months – doing nothing is not an option.
- Consider what’s really on offer from the existing supplier. Ask for a proposal of what the supplier’s deal is. What are the costs, is any ‘special offer’ time-limited, and what if you choose not to take up the offer?
- Discuss within the firm your needs from any new IT software. Don’t assume your existing supplier knows what’s best. There is no point paying for great functionality that won’t be used.
- Check which developers offer a migration path from your existing system. Find out about other suppliers with a good track record of migrating from your current system to theirs. With years of historical data, live matters and finance records, it’s inconceivable to re-enter data manually in exchange for a successful migration.
How can I believe what a software company tells me?
Look for third-party indicators, like awards or accreditations, to support claims about the quality of product and service.
Finally, if you’re unsure about the questions or fearful of understanding the responses, seek advice from a legal IT expert.
Tim Smith, Technical Director at Insight Legal