More on MTD and Spreadsheets

My post in August 2018 on the imminent demise of spreadsheets (for accounting records) was a little pessimistic and has proved to be wrong – The ‘linking’ software to which I referred (and doubted would be available) has indeed been developed and the one we use – from Absolute Accounting Software, works perfectly, at an affordable price and is as practical as it can be. It links perfectly with our own spreadsheet accounts record file, enjoyed by many and varied small businesses.

Spreadsheet accounting records are not the answer for everyone, but they are for many. With proper controls, the spreadsheets create information that can be translated efficiently into accounts and readily create the VAT returns.

Spreadsheets are ideal for the ‘Cash’ basis of accounting for VAT. A system introduced to aid small businesses and simplify their record keeping. The precise rules for records required by MTD are doing their best to thwart this simplification. The rules require a separate record for each and every ‘supply’ so that the recording of a payment that embraces several invoices for different types of supply, does not satisfy the MTD record-keeping rules. Each separate component of the payment is supposed to be recorded individually. This not only removes the comparative simplicity of the ‘cash’ recording, it makes it very difficult to identify errors, to reconcile the records to bank accounts and creates a significant increase in the number of transactions to record. A far cry from the simplification intended by the ‘Cash’ basis for VAT.

HMRC have relented on the rule to an extent – but further relaxation is required to make many spreadsheet records ‘legal’.

There had been a suggestion that the sanctioning of spreadsheets for MTD would be temporary but HMRC have confirmed there are no plans to prevent their use for the foreseeable future. Undoubtedly, the proper use of accounting software is to be encouraged but the learning curve for many ‘small’ businesses remains an issue. Records maintained badly, without understanding, in a software package, are likely to contain more errors, not less, than a controlled spreadsheet and the resulting accounting figures presented by the poorly maintained software package may be very unreliable and misleading. Far from helping with control of the business, the figures may be detrimental.

Training is the answer, but at what cost? Teaching even keen clients how to post transactions correctly can be a time-consuming challenge – at a cost the small business will not stand. So, at who’s cost? Cloud accounting and collaboration may be an answer – but a cost remains.

For now there remain choices and, as always, its a matter of horses for courses.