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Making VAT Digital

Can you enter more than one purchase invoice on one payment?

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We use VT Transaction+ who we are informed are will be VAT compliant after 1 April 2019, that will cover the first return.

If we enter a purchase total amount that covers more than one purchase invoice, enter the total VAT on all invoices, then analyse net amount for each invoice and enter the invoice number for each in the entery detail - will this be compliant?

Your thoughts would be appreciated?

Replies (26)

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RLI
By lionofludesch
02nd Jan 2019 17:25

Who knows what the next few months will bring ?

But we're led to believe it won't be.

You'll need to maintain a full purchase ledger.

And sales ledger for that matter.

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Replying to lionofludesch:
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By johnhemming
02nd Jan 2019 19:06

lionofludesch wrote:

Who knows what the next few months will bring ?

But we're led to believe it won't be.

You'll need to maintain a full purchase ledger.

And sales ledger for that matter.


My reading of the vat notice:
https://www.gov.uk/government/publications/vat-notice-70022-making-tax-d...

Does not appear to prevent the use of cash accounting. A lot depends on the details of how a computer accounting systems operate. Some allow a single payment against multiple invoices without necessarily running a purchase/sales ledger. In a spreadsheet it would be possible to have a number of lines which add up to a single payment.

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Replying to johnhemming:
RLI
By lionofludesch
03rd Jan 2019 11:56

I obviously can't say this too often but it's not what HMRC are saying.

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By Alex Perkin
02nd Jan 2019 18:11

Compliant - At a push

However, VT is a very good package from experience and it seems laborious and daft not to use its features in the way they are designed to. Is it is really too much trouble to input all of the invoices into separate entries like it should be?

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Replying to Alex Perkin:
RLI
By lionofludesch
02nd Jan 2019 18:15

HMRC released a statement saying they wanted every invoice entered, just in case one didn't have VAT on it. They saw it as being a common source of error.

This WILL be a big deal for some of my builder clients. They typically have 50-60 invoices a month, some for less than a tenner, so it's 50-60 entries to be made where previously, one would do. And not just necessarily the one supplier per month, either.

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BirdnCo
By BirdnCo
02nd Jan 2019 18:19

Thanks to lionofludesch and Alex.

We are led to believe that MTD requires a digital trail and by entering purchase invoices in the manner we described, does this not fulfill the MTD requirement. By entering all invoices as one entry and and noting the invoice numbers, we are doing so, albeit the total VAT is entered as one amount.

Yes VT is a very good package, but by using Sales and Purchase ledgers, one is creating extra work? It is simple to enter just one payment for more than one invoice using the cash basis, rather than maintain ledgers.

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Replying to BirdnCo:
RLI
By lionofludesch
02nd Jan 2019 22:09

Couldn't agree more. But it's not the advice HMRC are giving.

Whether that changes, of course, remains to be seen.

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Oaklea
By Chris.Mann
02nd Jan 2019 21:32

And, individuals (unrepresented taxpayers, to be precise) are expected to; be aware of the legislation and, comply, with this “car crash”?

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Logo
By marks
02nd Jan 2019 22:48

As far as i'm aware the requirement will be to record each invoice separately recording the VAT separately for each and then matching the payment against the relevant invoice. (effectively running a purchase ledger whether on a cash basis or invoice basis).

Now we all know how the majority of VAT registered businesses on the cash basis record their purchase invoices (they dont), they just record the bank payment when made without recording any of the purchase invoices.

I can see HMRC relaxing their requirement as to be compliant will result in a lot of extra work for businesses who maybe record 10 bank payments a month at the moment which cover 200 - 300 invoices (typically in the building sector where businesses just tend to make payment based on the supplier statement they receive). Processing 200 - 300 transactions per month rather than 10 would increase processing time by 4 - 7 hours assuming processed at say 45 invoices per hour. (or between half a day and a days extra work for no extra value to the owner)

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Replying to marks:
RLI
By lionofludesch
03rd Jan 2019 09:29

Has there been an epidemic of amnesia or something ?

https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-records-fact-or-fiction

Have a look at Fact One in the above link.

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Replying to marks:
By ireallyshouldknowthisbut
03rd Jan 2019 11:01

I think it matters very little what HMRC ask you to do so long as you don't make any errors.

They simply don't have the resources to enforce it, and their penalty regime requires at least a warning on record keeping before any financial penalty.

So long as you enter one transaction per bank payment, which clearly you are going to unless doing some really cowboy accounts, then its a "meh" quite frankly. Are you going to enter 50 travis perkins invoices, or the consolidated one they pay on at the end of the month?

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Replying to ireallyshouldknowthisbut:
RLI
By lionofludesch
03rd Jan 2019 11:57

I was thinking about that this morning and I'd probably go for the flat VAT fraction on the 50 Travis Perkins invoices. But I might show willing by entering the two KMR Skips invoices separately.

Or I might not.

Obviously, if we have a mix of rates, that might alter things. Grocers or newsagents might fall into that category, I suppose.

There's always the "undue cost" excuse to fall back on.

Nevertheless, I wouldn't lose sight of what HMRC say they require. On the other hand, they've been ignoring their own rules for 45 years.

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Replying to ireallyshouldknowthisbut:
paddle steamer
By DJKL
03rd Jan 2019 11:37

The catch is when you/your firm are doing the recording- you either:

a. do not write to the client to advise him/her that you are not going to keep his/her records in conformity with the legislation

or

b. you do write to the client to advise him you are not going to keep his/her records in conformity with the legislation.

(a) leaves you open to bleats/complaints/litigation from previous clients that you failed to ensure their records were in accordance with legislation, they paid you to ensure their records were compliant etc , this you did not do, etc

(b) puts in writing that you deliberately ignored the legislation- not a comfortable position.

The catch is that whilst penalties for non record compliance may only progress to bite post a first warning ,tax geared penalties following an investigation could well be impacted re record keeping. All you need is some cute HMRC employee saying in a meeting that if the records had complied with the legislation he/she would have considered a 30% penalty but as they do not he/she will be proposing a 50% penalty and your client is going to swivel his/her guns directs at you, the professional who should have advised.

Deliberate non compliance is placing yourself between a rock and a hard place and I do not envy those who will be continuing in the profession for a number of years.

My route is simple, I think I am going to switch a couple of my bigger clients into being my part time employer and what I then do/do not do in an employed position is a matter between me and my employer and any issues of compliance/non compliance will have been aired at non minuted meetings.

Thanks (1)
Replying to DJKL:
RLI
By lionofludesch
03rd Jan 2019 11:59

On the other hand, as I said yesterday on another thread, the Government are keen on making rules, not all that fussed about actually policing them.

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Replying to lionofludesch:
paddle steamer
By DJKL
03rd Jan 2019 12:21

I also do not see HMRC actively looking for non compliance (though the article I read earlier today about the Iceland Christmas saving scheme and NMW possibly gives me some pause for thought- hang commonsense, thems is the rules appears to be the approach).

I am more concerned with the rules being applied as and when the client comes within HMRC's review processes elsewhere within the tax system.

Currently re enquiries HMRC tends to have to break the records, if in future all they need to do is demonstrate non compliance with the will of HMG re what are proper records to keep, then this is a much simpler test for them to demonstrate non compliance and therefore guilt.

Non compliance is a useful big stick HMRC will be able to use, the fact that we are getting the legislation because they perceive (erroneously imho) it will close the tax gap tells you everything you need to know re their mindset.

The record keeping requirements re vat , as digital recording increases and grows into Income tax/Corporation tax, will be the benchmark standard used to demonstrate poor records, therefore incorrect records, therefore underpaid tax- their logic may be faulty but to me , anyway, their direction of travel is pretty apparent.

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Replying to DJKL:
RLI
By lionofludesch
03rd Jan 2019 12:36

Happily, I am in a position where I can confidently leave all that to you young people.

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Replying to lionofludesch:
paddle steamer
By DJKL
03rd Jan 2019 13:06

I think I will also be exiting stage right in the not too distant future, in five more days my other half has 365 days left before she can draw on her occupational final salary pension and she is giving every sign that she has little interest in carrying on until her state pension kicks in a few years later.

I suspect at best I may have another five years , into say my early 60s, before I get told I am stopping.

In the meantime I think winding down with a few employed positions rather than self employment is the way to go, no PII, no CPD (unless I want to do it) and much less to organise when I do finally hang up my calculator.

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Replying to DJKL:
RLI
By lionofludesch
03rd Jan 2019 13:29

DJKL wrote:
.... in five more days my other half has 365 days left before she can draw on her occupational final salary pension .....

So 370 days, then.

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Replying to lionofludesch:
paddle steamer
By DJKL
03rd Jan 2019 14:41

Effectively yes.

Will need to buy her a clock with a countdown function for her Birthday ,if such a thing exists, something akin to the transfer window clock.

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Replying to DJKL:
By ireallyshouldknowthisbut
03rd Jan 2019 15:05

@DJKL, if there is a deliberate decision made for a client to be non-compliant about something, I very much write that in the cover letter for the year end accounts, and explain why. Ie "I dont believe its cost effective to meet this rule as the tax will be right anyhow". So you advise the client not to bother, but make them aware. Some client will want it perfect, most just want the job done and over with. Whilst I tend to advocate a pragmatic approach to compliance, with an eye on costs and penalties, I always outline the risks too. In fact in my last compliance review by ICAEW it was commented that my cover letters were very detailed, and how that as sensible.

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Replying to ireallyshouldknowthisbut:
paddle steamer
By DJKL
04th Jan 2019 10:09

Thanks for that, it is the logical way to fudge the position whilst protecting one's back..

I appreciate it may be how I need to operate in the interim post April but frankly it is not something I am that comfortable with so I still expect my exit from practice will continue , just at a slower pace than first envisaged and now making use of the "forgiveness" year HMRC are granting so that I can observe how the land lies in reality.

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paddle steamer
By DJKL
03rd Jan 2019 00:05

Not per the Act.

The Value Added Tax (Amendment) Regulations 2018

http://www.legislation.gov.uk/uksi/2018/261/made

"32A Recording and keeping of information in electronic form

3(b)subject to sub-paragraph (c), for each supply received within the period—
(i)the time of supply,
(ii)the value of the supply, and
(iii)the total amount of input tax for which credit is allowable under section 26 of the Act(6);"

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Tornado
By Tornado
03rd Jan 2019 19:49

The more HMRC complicate book-keeping, the lower the rate of compliance will be.

Common Sense.

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BirdnCo
By BirdnCo
04th Jan 2019 10:44

Thanks to all who took the trouble to reply and we appreciate all your comments.

It does look like we will have to comply in full and thus avoid any consequences, despite who knows how the record keeping will be policed!

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By Monster Carp2
07th Jan 2019 15:00

Hi

HELP - please

I have a Ltd micro business that has been fully digitalised since 1998. I file my own VAT returns, Income tax returns and Ctax returns. I am fully conversant with all the peculiarities of my early version of Quickbooks. It works just fine for me and any entry, bank record, PAYE return, purchase order and invoice is fully traceable within a couple of minutes. It is also fully bombproof against future Microsoft attempts to make older programs obsolete by running in Oracle’s Virtual PC.

I was somewhat stunned last week when completing my quarterly VAT return I noticed a big paragraph in red that said the service was ceasing in April 2019. Further research indicated that something is also afoot for income tax returns but it isn’t particularly clear what is happening.

So I have two questions. Can anybody point me to where I can find out exactly what the Revenue’s intention is in full. For example will each quarterly VAT return in effect be a mini set of accounts?

Secondly is there anything available for as little money as possible that enables me to extract summary data from my existing software and enter it in to software that transmits it to HMRC. I really don't want to spend the time, money and mental energy starting all over again when what I have works just fine. I am supposed to be running a company not covering up HMRC's failed attempts to provide suitable on-line data entry facilities.

From other comments here I'm clearly not alone.

Thanks in advance

Peter

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Replying to Monster Carp2:
RLI
By lionofludesch
07th Jan 2019 15:25

Well, Peter, firstly well done for avoiding noticing Making Tax Digital since it was first mentioned four years ago. If anything demonstrates the problems caused by not having an accountant, this is it.

As you're familiar with Quickbooks, my immediate thought is that your best course of action might be to upgrade to the MTD version. Alternatively, you can try some bridging software - although this may well prove to be a sticking plaster approach as the MTD project moves on to other taxes.

Finally, just check that it does apply to you. It may not. And you can delay things for a while by opting to submit annual VAT returns instead of quarterly.

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