MTD for VAT - relaxation on posting supplier statements
HM Revenue & Customs (HMRC) has updated its VAT notice regarding Making Tax Digital (MTD) for VAT to relax several of the digital recordkeeping requirements.
One of the changes, secured with the help of the Chartered Institute of Taxation (CIoT), relates to purchase invoices from suppliers.
It has become apparent in sectors that receive a high number of purchase invoices from the same company, that they are having to file multiple almost identical records, which is becoming very onerous.
MTD for VAT requires each individual supply or invoice to be entered as a new digital record.
However, a relaxation to the rules has been agreed, which will enable businesses to capture their digital records information from supplier statements, rather than from each individual invoice, as long as “all supplies on the statement are to be included on the same return and the total VAT charged at each rate is shown”. This change will only apply to purchases and not sales.
HMRC has also agreed to review the requirement for petty cash. Currently, the strict requirement is to record each individual supply, or at least each individual invoice/receipt, within a company’s digital records.
Instead, the updated VAT notice says that petty cash transactions can now be added up and summary totals entered as an alternative digital record.
The notice states: “This applies to individual purchases with a VAT-inclusive value below £50 and the total value of petty cash transactions recorded in this way cannot exceed a VAT-inclusive value of £500 per entry.”
The third and final relaxation of the rules relates to charity fundraising events run by volunteers. Under the new guidance the total values of supplies made can be entered as a single transaction, and similarly for supplies received.
HMRC has told the CIoT that it will not currently be seeking to apply record-keeping penalties where a business is clearly trying to comply with the requirements of MTD. This is in line with their previous promise of providing a ‘soft landing’ period in the first year of the new digital tax regime.
For more information, contact Baines Jewitt on 01642 632032