The first monthly VAT returns required to submitted under MTD are due in by 7 June 2019, and the first quarterly VAT returns due under MTD must arrive with HMRC by 7 August 2019. In spite of these close deadlines HMRC is still adjusting the MTD rules as set out in VAT Notice 700/22.
The latest version of this Notice was issued on 3 May 2019, and it includes some welcome simplifications regarding the digital recording of supplier statements and petty cash transactions. There is also a concession for charity fundraising events.
HMRC now accept that a business can record the totals from its supplier statement instead of all the individual purchase invoices issued by the same supplier. This will help businesses who make say one payment per period to each supplier, and their accounting records are compiled from the bank-feed of transactions. This relaxation only applies if all the invoices on the statement fall into the same VAT period, and the amount of VAT charged at each rate is recorded. Notice 700/22 says this change has the force of law, so you can rely on it.
Petty cash transactions can also be recorded as a single digital record, where the total amount is no more than £500, and the individual purchases were each no more than £50. This relaxation also has the force of law.
Charity fund raising events tend to be run by volunteers, who may buy supplies personally and then reclaim a total amount back from the charity as a reimbursement of expenses. HMRC has quite reasonably agreed that the charity can record all supplies relating to one event as one invoice. That concession is also given the force of law.
There is some confusion about what data must be recorded digitally, and when that data must be transferred digitally, rather than as retyping or as a cut-and-paste exercise.
When an invoice has been received digitally by email as a word file or PDF document, it does not have to be imported into the accounting system digitally. The law says you must record these data points:
- Time of supply
- Value of the supply
- Amount of VAT to be reclaimed
The taxpayer is within the MTD rules if he types those three points into his accounting software pack or spreadsheet. This is the formation of his VAT record, not the point the supplier invoice is received. Once the data is within his accounting system it need to be digitally transferred to the VAT return via digital links, without further retyping, or by cut-and-paste or copy and paste.
Section 4.2 of the VAT Notice 700/22 is the best place to look for guidance on digital records and digital links.
Written by the Tax Advice Network