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HMRC relax MTD ‘supplier statement’ policy

HM Revenue & Customs’ (HMRC) latest Making Tax Digital (MTD) policy update will translate into a significant time saving for many businesses that adopt spreadsheet accounting.

MTD for VAT was introduced in April 2019, for all UK businesses making annual taxable supplies of more than £85,000. The new rules apply to VAT periods beginning on or after 1 April 2019.

Under the cash accounting scheme, input tax is only claimed when payments are made to suppliers.

Prior to the most recent amendment, to VAT Notice 700/22, a business using the cash accounting scheme and spreadsheets to digitally record expenses had to record each and every purchase invoice in a digital format.

This is despite the fact that it might make only a single payment to a supplier based on a statement covering, for example, 40 invoices.

Considering this, logic says that a business should be able to post a one-line entry to reflect the total payable.


Supplier statement policy update

As of 5th May, however, HMRC’s position on the recording of purchase invoices under MTD for VAT has changed.

Businesses can now use supplier statements to record expenses for input tax purposes. Hence, a one-line entry is now adequate.

However, if the statement comprises multiple invoices at different rates of VAT, the totals relevant to each of the rates must be recorded separately.


Recording purchase invoices under MTD

Michael, who is a Painter & Decorator, sources all his paint (standard rated) from the same supplier, but one month he also decides to buy a couple of decorating manuals from the same supplier (zero rated).

The supplier statement for the month in question shows a total due of £1,300. This comprises £1,200 of wood and the £100 manual.

It is now acceptable to make a digital accounting entry as follows:-

  • Paint £1,000
  • Manuals £100
  • VAT £200
    • Total Payment £1,300


Petty cash expenses

HMRC has also confirmed that petty cash expenses can be posted as a single total.

This applies only where no individual receipt within the posting exceeds £50. The total of all receipts should also not exceed £500 per entry. Both figures are VAT inclusive.


Have you secured the right support?

Businesses within scope should now be keeping digital records. VAT returns must be submitted using functional compatible software, from the start of the businesses first VAT return period beginning on or after 1 April 2019, or 1 October 2019 if they are covered by the 6-month deferral.


When will you file your first MTD for VAT return?

The relevant dates for businesses with an April 2019 start date, that file quarterly, are:


First mandatory MTD for VAT return period Digital accounting records must be kept from Deadline for filing first mandatory MTD for VAT return
Monthly 1 April 2019 7 June 2019
1 April 2019-30 June 2019 1 April 2019 7 August 2019
1 May 2019-31 July 2019 1 May 2019 7 September 2019
1 June 2019-31 August 2019 1 June 2019 7 October 2019


You should be clear about when the ‘right’ time to register is, and how this fits with your filing deadlines.


How can George Hay help?

If you haven’t already, consider enlisting George Hay to assist you with your obligations under MTD, while there’s still time! If you are a client and you have questions about what is required of you under MTD, contact your usual adviser.

We want to see the businesses we work alongside continue to thrive following the implementation of MTD. Our advisers are already helping many of our clients to look at it as an opportunity, not something to oppose.

Our experts are able to work with a range of online accounting software packages including Xero, Kashflow and Sage. We can help you to choose and implement the system most suited to your needs and we can advise you throughout the transition and beyond.

To discuss MTD in more detail with one of our experts in Bedfordshire, Cambridgeshire or Hertfordshire, contact us today. 

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