If HMRC Can’t Say, Who Can? – Records Required for ‘Cash Accounting for VAT’ Under MTD

15th October 2018

Reference to VAT Notices 700/21, 700/22 and 731 suggests that a business using Cash Accounting for VAT under Making Tax Digital will be required to:-

  1. Maintain digital accounting records at transaction level:
  2. Keep a digital VAT account using Accrual accounting;
  3. Cross reference Monies Received and Paid against individual Sales and Purchase invoices within their digital Sales and Purchase Ledgers;
  4. Using their digital connected software, accurately calculate VAT Inputs and Outputs within Monies Received and Paid in the VAT period, for submission in the VAT Return.

It seems that it will not be acceptable to not maintain a VAT Account using Accrual accounting or to use a digital Cashbook which records Monies Received and Paid without cross referencing to primary transactions, being Sales and Purchase invoices.

This seems unnecessarily burdensome and so on 12 September we wrote to HMRC for technical clarification regarding the records required. On 4 October came their reply.  They said ‘At the moment, we are still in a phase where we are testing the process and how it works with a limited number of invited businesses. The number of invited businesses will increase as we approach April 2019.  This is the only information we have and are unable to confirm any of your comments at this time’.

We are pressing HMRC for more detailed information and will post further updates here when we have news. In the meantime  users of the cash accounting scheme should note what currently HMRC require, as detailed in the appropriate VAT Notices.



 
Other items in Blogs
 
Ian Piper
24th September 2020 Corporation Tax due soon: Not necessarily.

Companies with 31 December 2019 year ends will be due to pay their corporation tax on 1 October 2020. If that company is expecting to suffer a loss during the 2020 financial year, perhaps due to COVID-19 related reasons, it should be possible to carry that loss back one year and claim a refund of…

Read More »

Ruth Pearson
17th September 2020 Fuel Rates From September 2020

HMRC have updated the latest company car advisory fuel rates. These rates apply from 1 September 2020.   The guidance states that you can use either the previous or current rates, for up to one month from the date the new rules apply.   The new rates per mile are below: Engine size Petrol LPG…

Read More »

Robert Baxter
16th September 2020 Redundancy Pay & Payment in Lieu of Notice (PILON)

HMRC have introduced legislation which ensures employee’s statutory rights, including redundancy pay and payment in lieu on notice (PILON), are based on an employee’s normal pay and not their furlough pay.   Redundancy pay   An employee is entitled to redundancy pay if they have been working for their current employer for 2 years or…

Read More »

Ruth Pearson
15th September 2020 Coronavirus Job Retention Scheme and the Job Retention Bonus

We are halfway through September and this month sees one of the biggest changes to the current Coronavirus Job Retention Scheme (CJRS). Employers now pay 10% of furloughed employees’ wages to make up 80% of their total wages up to a cap of £2,500, with the wage cap being proportional to the hours not worked.…

Read More »

Richard Alecock
10th September 2020 Self Assessment Deadlines

Two self assessment deadlines are approaching:   5th October 2020 For those individuals who have not previously completed a tax return you will need to report to HMRC a liability for 2019/20.   31st October 2020 For those individuals who have previously submitted ‘paper’ self assessment tax returns, the deadline for the 2019/20 return is…

Read More »

Jaimie King
4th September 2020 New charity register

The Charity Commission has launched a new public register for charities – making information more transparent.   Using the below link, anyone can search for details of a charity which includes data such as financials, who the trustees are, and whether the charity fundraises from the public.   The Charity Commission wants members of the…

Read More »