As we approach the end of the Making Tax Digital for VAT (MTD) soft landing period, now is a...
Rishi says ‘Relax’: Further updates to MTD LegislationRishi says ‘Relax’: Further updates to MTD Legislation">
Last time out we covered HMRC’s announcement to extend the soft landing for MTD to April 2021 and the legislative change was confirmed in the VAT notice published last month. Along with this extension, a number of other ‘relaxations’ to the existing requirements were added that cover many standard business processes.
Now, it is probably fair to say that reading legislative government updates is something of an acquired taste and here at Cooper Software we take on the burden to save you from that particular fate, please find below a summary of the changes:
|Sales by 3rd parties||
If it is not practical to record digitally every supply, the summarised supplies can be entered as a single invoice when the information is received.
When claiming the input tax incurred on expenses, if the individual provides the combined value of more than one purchase, you do not have to record each purchase separately.
Best practice is to record digitally every individual supply but HMRC accept this may be difficult to do in certain circumstances. They will accept entering from a supplier statement if all the supplies on the statement relate to the same VAT period and the total VAT charged at each rate is shown.
Separate cross referencing of the statement to the individual invoices must be done.
Where a business uses petty cash to pay for small value items, these do not need to be individually recorded in the digital records, they can record the total value and the total input tax allowable.
Applies to individual purchases with a VAT-inclusive value below £50 and where the total recorded does not exceed £500.
|Charities||HMRC will accept that charities can record digitally all supplies made relating to the event as if it were a single invoice, and all supplies received can be treated similarly.|
If your software records reverse charge transactions, you do not need separate entries for the self-supply and purchase.
|Retail Schemes||If you account for VAT using a retail scheme, you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT within functional compatible software.|
|Flat Rate Scheme||
If you account for VAT using the Flat Rate Scheme you do not need to keep a digital record of your purchases unless they are capital expenditure goods on which input tax can be claimed.
You do not need to keep a digital record of the relevant goods used to determine if you need to apply the limited cost business rate.
|Gold Special Accounts Scheme||
If you make any sales under the Gold Special Accounting Scheme, you must keep a digital record of the value of sales made under the special accounting scheme for gold and the total output tax on purchases under the special accounting scheme for gold.
You are not required to keep the additional records required for these schemes in digital form, nor are you required to keep the calculation of the marginal VAT charged in digital form. These records must still be maintained in some format.
If your software scans/saves a copy of the invoice and OCR imports the details automatically you do not need to retain the invoice.
Remember, these ‘relaxations’ only relate to the minimum requirements on maintaining records, there will, no doubt, be lots of additional information you should record as part of good business practice or to comply with other legislation.
Finally, you should note, that it’s not all relaxations, dispensations and lolly-pops coming from HMRC, the last update specifically reiterates the future requirement to gather the data underlying the VAT return. This was the original ambition for MTD and while they put it on hold for the go live of MTD, the manifold benefits to the treasury make this an inevitability – it’s only a question of when, not if.
This will vastly increase the amount of data being sent to HMRC so now is the time to make sure your MTD solution not only meets the mandate beyond the soft landing period but can also grow with the requirements. If you would like to discuss our cloud-based solution to the current and future requirement, TrAX Digital, please don’t hesitate to call.