Having read the comments under the above article I wonder if I’m taking it too seriously. I get the impression that others have concluded that bridging software will mean business as usual for clients keeping their books in almost any format. Could anyone help to clarify just what I should advise in these cases?
- Retail shop – with no electronic register records total daily takings on spreadsheet from which they compile VAT Return.
- Franchise business providing domestic cleaning services – their franchisor software raises sales invoices. We use reports from the franchisor software to manually enter monthly totals into VT Transaction+ from which the VAT Return is prepared.
Having read paragraph 3.2 .1 Digital links of VAT Notice 700/22 I have so far advised that in both cases the client will need an electronic cash register / software that will automatically export sales readings into their bookkeeping package (that is, after the soft landing, during which cut and paste could be used – but even that isn’t really being used now and might be difficult to achieve).
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I don't see a problem with either of those scenarios continuing. The HMRC notice says "Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links." I take that to read that the original data can be in any format, i.e. till slips, reports, etc., and then re-keyed into the accounting software, and it's that point that it always needs to be digitally transferred. I.e. the till or sales report isn't "digital accounting software". It's no different to manually entering a purchase invoice into the software. The "digital" side of things starts from the data entry into the book-keeping software, and not before within other systems. Practically, it would be impossible for it to be anything other than that - loads of till systems will be incompatible - loads of specialist "front end" systems for, say, hotels etc won't have links to accounting software. It's completely impractical to expect businesses to change all their non book-keeping systems to ones that have built in VAT functionality or that have digital links to accounting software.
Ken - thanks for your reply. I had missed that point in para. 3.2.1 however I'm not sure that it resolves the potential problem:
Under VAT Notice 700/22, 3.3 Records that must be kept digitally
Supplies (sales) para. 3.3.2 - speaks of recording the time and VAT amount of EACH supply made.
Does this not mean that all systems should therefore be recording point of sale info? In my cases above: Each till register sale should be imported into the software (rather than daily total)?! Each sales invoice from the franchisors systems should be imported (rather than currently monthly totals)?!
I hope this isn't the case!
From para 3.5 of VAT Notice 700/22:
"The following rule has the force of law:
In addition to the records listed in paragraph 3.3 above, if you account for VAT using a retail scheme you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT within functional compatible software."
I think you are listening to the sales pitches and not reading the legislation.
All the base data can be keyed, imported, how you like.
You are still allowed to use day books for till receipts.
As far as i can see the only thing you are not allowed to do is type in the final few numbers at the end into the portal, all the rest is up to you quite frankly
Don't forget the "reasonably practicable" exemption "for any other reason". That's one I'm looking forward to fighting at a VAT tribunal. Let HMRC argue their dumb systems are practicable.
But beware the purchases side, my reading is that a PDB and P/L strictly is required re my retail clients as each individual supply on the purchase side appears to need to be detailed re date/ name/ amount/vat. (Single line cashbook entry paying multiple invoices from a supplier does not appear to conform)
My understanding (which arises from writing some MTD code) is that it basically means that once data has been put into a system it should not be retyped. I find the block on cut and paste sad because that can still be used to map data. However, sometimes we have to accept things that are a bit over the top.
I think where you might have a problem is with your second scenario and transferring sales invoice data from the franchise system into VT. My understanding is that this would have to be via digital link.
One would hope a csv export would be possible from the franchise software and then an import into VT via the Universal Import sheet (UIS). However I think there was a recent post that sales ledger data cannot use the UIS so that may need some investigation.
Thanks Paul, I'd agree with this conclusion.
I've just had a quick try of VT's UIS and it appears that sales invoices could be imported using UIS > General Options. I could be wrong I'll now see if client can send his sales report in .csv format and try this out.
Thanks all - many heads have been a great help on this one.
If the franchise system prints (in whatever format eg - paper / PDF) the sales invoices, I’d say that this hasn’t been digitally stored yet. I’d be happy typing the figures from these sales invoices into an Excel.
Otherwise everyone that raises sales invoices in Word is screwed.
I would draw a distinction in that I would see Word as just an electronic typewriter in this instance (although I am not wholly confident that HMRC would take the same view but let's hope for some common sense).
But it sounds, in the OPs case, that the franchise software stores invoice details in a reportable form. In that case I would say it is definitely digitally stored.
Thanks Paul, this is essentially the case - I've still to contact the clients concerned - I'm just hoping that can exports sales invoices to .csv
I have clients who cant even use a computer let alone deal with all this idiotic record keeping. I think HMRC will be getting rubbish filed to them and can see no benefit in the new system. HMRC will lose money in time costs of dealing with the mess and clients filing the mess. MAD
I did a trial MTD submission on the phone with a farm recently (uploading a CSV file from a spreadsheet) and they had no problem with the process. It will be interesting in many ways, but I think it has the potential of working quite well.
Basically, HMRC has backtracked massively on their original concept of what MTD entailed. When it was first mooted in 2015 I really think they assumed that all businesses could conduct their activities in an entirely digital manner with every process being in electronic form from the outset. That meant they could ask for all this digital data to be submitted directly to them on a regular basis for ALL taxes, Income Tax, VAT, Corporation Tax etc.
The current version of MTD seems to actually say that, no, the data does not have to be digital originally but the numbers can be manually typed (if the original records are not computerised) into an approved piece of software, in summary form if necessary, and then transmitted to HMRC.
In other words, the data will look very much like what they get in the current Government Gateway version of the VAT return - except you can't use the Government Gateway because it will be permanently locked.
There is, of course, a movement away from cash. However, everything really needs to start with a real world concept which does not necessary involve an electronic record. I don't blame HMRC for wanting a movement away from cash. I remember when I was running a music business someone saying they would remove the VAT if I paid cash. I said, I will pay the invoice with the VAT after all I am vat registered. Their response was that they were not actually vat registered so could not give me a vat invoice. I still paid with a cheque anyway. A cashless society is one in which it is harder to avoid an audit trail
The government gateway will still be open for now for businesses under the threshold.
