Making Tax Digital for VAT: Supplier statements now acceptable

24th May 2019

In a welcome about turn, HMRC has changed its controversial policy on the recording of purchase invoices under Making Tax Digital for VAT. This will mean a huge time-saving for many businesses using the cash accounting scheme.

 

Under the cash accounting scheme, input tax is only claimed when payments are made to suppliers, and prior to the recent amendment to VAT Notice 700/22, HMRC’s policy has always been that a business using the cash accounting scheme and spreadsheets to digitally record their expenses, had to record every single purchase invoice in a digital format, even though the business might make a single payment to a supplier, based on a statement covering perhaps 40 or 50 different invoices. It would be sensible for the business to just make a one-line entry based on the payment total.

 

The update to VAT Notice 700/22 on 5th May 2019 has relaxed this policy (para 4.3.3.1), and it now means that supplier statements may be used to record expenses for input tax purposes, hence a one-line entry is now acceptable. However, if the statement comprises invoices at more than one rate of VAT, the individual totals relevant to each VAT rate within the payment, must be recorded separately.

 

For example, Joe the carpenter buys all his wood (standard rated) from the same supplier, but one month he also buys from that supplier a carpentry manual (zero rated). The supplier statement for the month shows a total due of £1,300 consisting of £1,200 of wood and the £100 manual. It is now acceptable to make a digital accounting entry as follows:-

 

  • Wood £1,000
  • Manual £100
  • VAT £200
  • Total Payment £1,300

For more information, contact your local W&P office https://www.whitingandpartners.co.uk/about-us/contact-us/



 
Other items in Blogs
 
Vanessa Pearson
16th January 2020 Off-Payroll Working Rules: 11th hour reprieve?

Those personal service companies working in the private sector (referred to, variously, as freelancers, consultants or contractors) should now be aware that new tax rules will apply to them wef 1-Apr-20.  These rules, off-payroll working, aim to finally clamp down on the abuse of the Inland Revenue Press Release number 35 tax rules (IR35) that…

Read More »

Lucy Bayliss
8th January 2020 It’s the final countdown!

There are only 23 days until the self-assessment tax return deadline of 31 January 2020. If your return is not filed electronically by this date, an automatic £100 penalty will be applied. Please note that the deadline for filing a paper tax return was 31 October 2019 and therefore all returns are required to be…

Read More »

Vanessa Pearson
13th December 2019 April 2020 Proposed IR35 changes: Status appeals process

As the planned changes to who determines IR35 status are fast approaching, contractors would be well advised to review their contracts on HMRC’s updated CEST (Check Employment Status for Tax) tool. Having provided answers to questions regarding substitution, control and nature of the work, the updated tool will give HMRC’s view of the workers employment…

Read More »

Ben Kilby
12th December 2019 VAT Surcharge

Have you or your business received one between 23 April 2018 and 31 January 2019?   If so, you may want to check if it has been dated. If it has not been dated you may be in for a refund. Any surcharge liability notice or surcharge liability notice extensions are invalid if they have…

Read More »

Lucy Bayliss
25th November 2019 Don’t let your tax bill affect your festive joy. Instead, spread your tax payments throughout the year!

With the festive period fast approaching, it is easy to lose sight of your self-assessment tax return!   If you are employed or receiving a pension and you file your return before 30 December 2019, you can elect to have your tax collected through ‘Pay As You Earn’ (PAYE) rather than paying one lump sum…

Read More »

Ian Piper
22nd November 2019 2019 Growth: Missing in action?

(Data Source) As another year draws to a close, local SME businesses will be forgiven for looking forward to drawing a line under it. With 2019 sales growth barely nudging 1%, it has been a year of focusing on not slipping backwards, rather than the usual mantra of continually signing up new accounts.  When commentators…

Read More »