Making Tax Digital (MTD)

Key points:

• You can manage all your finances through Light Blue, but you don’t have to.
• MTD allows you to use CSV exports & imports to pass financial information between tools or give to your accountant.
• Light Blue provides export tools to allow you to do that.
• You can use tools like Quickbooks or Xero, but you don’t have to.
• You can send data directly to HMRC using one of many “MTD Bridging tools”

What is MTD?

Making Tax Digital (MTD) is part of the UK government’s plan to make the country’s tax system more efficient.

Its first stage came into effect in April 2019 and applied to businesses based in the UK that were registered for VAT. Our customers have been using the tools in Light Blue to meet the requirements of MTD since the scheme came online.

The scope of MTD is set to widen in 2024 for self-employed businesses with annual business income above £10,000.

Can I manage all my finances through Light Blue?

Yes, many of our customers manage all their business finances (income and expenditure) through Light Blue and then either send the data to their accountants or file their own returns with the data.

But you don’t have to manage all your finances within Light Blue, and customers exist on a spectrum from those using all of the financial tools in Light Blue to those who don’t manage any finances within Light Blue (but still enjoy the benefits of our organisational tools like workflows, forms, emails, contracts etc).

It’s worth bearing in mind that anyone telling you that you have to use a specific product in order to comply with MTD is probably trying to sell you something!

Am I allowed to use CSV files to pass data between products?

Yes. HMRC have made it clear that importing and exporting CSV files to pass between services constitutes a “digital link”.

Preparing data for your accountant

Exporting your financial data from Light Blue to pass to your accountant is straightforward. Go to the Records menu, choose Export, then Financial Information and choose the period that you’re interested in. Light Blue will save a collection of CSV files that you can give to your accountant and represent the raw financial data for that period.

Your accountant may also find a summary of your income & expenditure helpful, which you can get by clicking on the Reports menu, then choosing the Income & Expenditure report.

Light Blue also has a Tax report (also in the reports menu) which itemises the tax charged or paid in the given period. Customers who are already complying with MTD for VAT requirements have been using the CSV export of this report to give to their accountant or pass to an MTD bridging tool.

Sending data directly to HMRC from Light Blue via a bridging tool

Bridging software can be used to take VAT report data exported from Light Blue and submit it to HMRC via the MTD for VAT API.

If you Google “MTD for VAT bridging software” then you’ll find lots of options, many of them cheap and some as simple as an Excel spreadsheet. One product that our accountants have tried is Absolute Excel VAT Filer.

Using tools like Quickbooks & Xero

You don’t have to use accounting tools like Quickbooks and Xero in order to comply with MTD, but many of our customers choose to enjoy some of their extra features.

With our QuickBooks export feature, you can export all your invoices from Light Blue to import straight into QuickBooks. This means you have all the benefits of using Light Blue’s online services such as online booking forms and contract signing plus invoicing and you don’t have to create a duplicate invoice manually in QuickBooks. Here is a handy video to see how it works:

We don’t currently have a specific export format for Xero and other tools, however it’s possible to either export using the Quickbooks feature or use the “Export Financial Information” command and then edit the CSV file(s) to match your accounting tool’s required format before importing.

Importing financial information in to Light Blue

If you have records of your purchases in another app or service, it’s possible to import those records in to Light Blue from a CSV file. Each row of the CSV represents a purchase record and you can match columns in the CSV with relevant fields in Light Blue. Read the guide on importing purchases from a CSV.

It isn’t possible to import sales records in to Light Blue, so you’ll need to create your invoices within Light Blue.