Penalty for non-compliance with MTD

No digital link

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I'm looking at a hotel with a very old EPOS/booking system - the only way of extracting info is by printing reports.

Their procedures involve preparing a monthly journal of sales in Excel and posting to the accounts system.

The preparation of the journal involves manual re-keying - no digital link. Everything is reconciled with amounts received into the bank each month though.

What would HMRC's view of this be? Is the main risk here the £1,500 slap on the wrist for non-compliance with MTD?

Any suggestions of how it can be made compliant? I did wonder whether printing to PDF and extracting details using Power Query in Excel might be a sufficient digital link.

Replies (23)

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By David Ex
03rd May 2024 19:29

How are you dealing with VAT MTD? I've no idea but are the requirements for IT proposed to be substantially different?

Just make sure your client is aware that there is no clear HMRC guidance and so any attempts to anticipate requirements may be prove futile - in whole or part.

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Replying to David Ex:
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By the_drookit_dug
03rd May 2024 19:36

Sorry, should have clarified - this is VAT MTD!!

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Replying to David Ex:
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By FactChecker
03rd May 2024 19:41

I'd assumed that this was related to VAT (the other 'elements' of MTD not being of much concern to most people - for now at least)?

If so, then one of the many 'bridging software' solutions should provide the cheap, if not free, solution.
Do HMRC like those?
No, but they had to allow them or there'd have been mass non-compliance.

And they seem to have given up on the 'purist ideal' with which they started (as in no human intervention from data capture onwards) so, as long as you regard your spreadsheet as your core bookkeeping repository, they no longer seem to care what you did for it to get there ... as long as it is picked up from there and submitted (using bridging software) without any re-keying into the submission.

Frankly, pathetic ... but that's my understanding of where we are unless as they say someone knows otherwise ...

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Replying to FactChecker:
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By Paul Crowley
03rd May 2024 20:16

That is what is happening, even if it does not comply.

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By Matrix
03rd May 2024 20:07

I had a client on the flat rate scheme. 3 invoices a quarter. I typed them into excel and used bridging software. Where does it say you can’t type in your sales?

I am sure the bookkeepers for my retail clients enter the sales manually in Xero. Are you suggesting every retailer has to have a link from their till to their MTD software?

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Replying to Matrix:
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By the_drookit_dug
03rd May 2024 20:28

Daily Gross Takings may be keyed in manually - this flows from the retail scheme rules.

However, this is a monthly journal. My understanding is that such a process would only be trully compliant if there were a digital link from the EPOS/booking system to the accounts system.

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Replying to the_drookit_dug:
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By MartinJones
08th May 2024 10:28

If you are already doing the VAT calculation in Excel and that is in essence your accounts system, then you could look at PwCs beautifully simple bridging solution which also lives in an Excel spreadsheet. If your concern is that HMRC are not going to approve of re-keying / copy and paste between spreadsheets - then have the PwC tool read directly from your accounts spreadsheet.

https://www.pwc.co.uk/ux23/products-and-services/pwc-making-tax-digital-...

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By Londonacc
03rd May 2024 20:38

Wrong thread.

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By TCatHyde
08th May 2024 10:36

I am amazed that some accountants haven't got all their clients using accounting software. It doesn't matter how they invoice their customers as long as all the sales are individually entered into their system.

With modern cloud software and bank feeds, it's cheap, quick and easy, and the accountant can either do the book-keeping or just keep an eye on it and help when needed. VAT returns are at the push of a button and MTD for ITSA will be a push-over.

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Replying to TCatHyde:
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By philaccountant
08th May 2024 11:18

I'm amazed that there are accountants out there who deal with no clients who object being told to change their entire accounting system, which has been working perfectly well up til now, just to meet some pointless HMRC diktat.

Must be nice to live in a bubble where you can just force unnecessary (and costly) change on people with no push back.

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Replying to philaccountant:
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By TCatHyde
08th May 2024 11:27

Force??
When people realise it takes them less time, costs them less in accounting fees and saves them all the money caused by manual errors, who needs force?

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Replying to TCatHyde:
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By Roland195
08th May 2024 11:41

But in this case the client is already using Accounting Software - the issue is the lack of direct interaction between this & the Booking/Payment platform.

Accounting Software is not the panacea it is made out to be with this just being one example.

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Replying to TCatHyde:
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By FactChecker
08th May 2024 14:39

Your logic is impeccable - even if your presumptions are flawed.

But "who needs force?" would be best addressed to those writing the legislation that IS enforcing it.

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Replying to TCatHyde:
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By MartinJones
08th May 2024 22:53

@TCatHyde - the real world isn't always so simple. If the client is selling things or services where there is a procedure of raising invoices then yes, do it in modern accounting software, cloud or otherwise, and all will be easy to process. If the client has multiple different ways they take money and charge fees then it is not always practical to impose a new system. I dont see why they can't take a daily or even monthly total from the disconnected systems and consolidate into software application, cloud or even a single spreadsheet that is their accounts ledger. As long as the process is robust honest and open to proof that the numbers add up is that really a problem? They dont need to rekey every single sale in most situations.

I have (when younger) taken the approach with clients of walking in on day one and setting out a complete overhaul of processes and systems. It doesnt always go down very well and some of the smaller businesses simply can't afford the time or cost to change.

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Replying to MartinJones:
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By TCatHyde
09th May 2024 09:32

Martin Jones - I completely agree with you - except for the point where you mention spreadsheets.

Selling system -> spreadsheet -> software/electronic transfer->HMRC
will never be as good (or easy or reliable) a set-up as
Selling system -> Software -> HMRC

Every transfer, manual entry and self-written spreadsheet is an invitation to errors.

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Replying to TCatHyde:
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By FactChecker
09th May 2024 12:09

"Every transfer, manual entry and self-written spreadsheet is an invitation to errors" ... so you've swallowed the HMRC 'philosophy' hook, line & sinker?

An 'invitation' to errors doesn't mean that it will happen, merely that it creates an opportunity ... it's like saying that crossing the road is an invitation to being crushed by a bus (possible, but thank goodness extremely rare in practice).

And you surely don't believe that your 2nd (preferred) scenario is any more proof against the introduction of errors?
There's user errors (in how the software is initially set-up), and software errors (from faulty feeds to incorrect default parameters, and occasional actual bugs), and not forgetting HMRC's ability to screw things up whilst passing the data between multiple different systems at their end.

Anyone who's had to sort out the mess arising from those kinds of problem will know the effort and pain to unscramble it ... not helped by the taxpayer's lack of understanding as to what actually happened ('cos it's all automated innit).

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Replying to TCatHyde:
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By MartinJones
09th May 2024 14:32

I agree and I am not advocating using spreadsheets as the main bookkeeping tool, all I am saying is that there can be good reasons why there is not a single system, or even multiple elegantly joined up systems in place. These situations often evolve and stepping out of them can be too complex and costly for the client to deal with.

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paddle steamer
By DJKL
08th May 2024 11:10

Is the issue here not frequency- if daily figures entered manually from till into excel and excel uses bridging to submit to HMRC (like say TaxCalc vat bridging)are they not then compliant?

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Replying to DJKL:
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By MartinJones
09th May 2024 14:26

My understanding was the HMRC's intention was that the numbers on the VAT return would be populated by the system that calculated them rather than by a human keying them in. If your bridging software is therefore reading from whatever is doing the calculation then that would suggest it was compliant. The situation in this case is that the numbers going into the system are from disconnected systems or processes. I accept that is open to errors and less than ideal, but I am not aware of any rule that dictates the frequency or method of inputs from disconnected systems to the main accounts system.

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By Roland195
08th May 2024 11:20

While I suppose the client will have to update their system eventually, I would take the view that whatever they can be fined for non-compliance (if there is even anything non-compliant about it) it would surely not exceed the cost to the client of doing anything else.

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By tracey2412
09th May 2024 11:02

Had similar recently when the data from an MLM back office would only export in notepad! Very frustrating when you can't even get a .csv which at least can be manipulated to import as a bank statement to most accounting systems & retain a semblance of identifiable data (unless it's Revolut merchant account, utter nonsense!)

have you tried Zapier or one of the other 'linking' softwares perhaps?

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By NewACA
09th May 2024 12:14

There is nothing wrong in what is going on. It is only at the point you have your accounting records already in bookkeeping software, which includes a spreadsheet, that the rules on digital links apply. So manually inputing data whether that is sales, journals or anything into the accounting software does not need a digital link, as it only requires a digital link after I has been put manually into the spreadsheet.

Secondly, I like many other accountants do not put all our clients onto non-Excel software, simply because for some client scenarios it is quicker, simpler, less error prone and costs less for some clients to be on Excel. Excel is a piece of software, it is not non-software. Excel can do anything you want it to, that can be done on other software. I've seen a flight simulator game written in Excel, Excel is just another programming platform, or can be used as a spreadsheet, or a hybrid of the two. I do have clients on Xero, Sage, QB, but it is simply far more efficient for some clients to be on spreadsheets. If that is not the case for you, that be because you only hold yourself out to certain industries, or you haven't developed or purchased a decent double-entry bookkeeping Excel program. Our 2nd biggest client (a builder of new homes) of turnover £6m is on spreadsheets. It takes one day to do a quarter's bookkeeping, and their year end accounts are as simple as Xero records or anything else, as our Excel file produces a trial balance, general ledger, aged creditors report etc. It is quicker to use Excel in this case, as the purchases, and there are many of them, come in a spreadsheet from the client and there are only 3 - 6 sales a year, and the bank is quicker to copy and paste from a bank download and categorise that doing it on other software that might use a bank feed. We can process and categorise in our Excel file 100 bank transactions in 5 mins, you cannot do that in Xero or anything else. The client keeps purchases in a spreadsheet as he likes to do all sorts of industry calculations that no off-the-shelf software does, he does them in Excel. So we do not have a one-size-fits all policy. Accountants that end up putting all clients onto non-Excel software usually become dumb and downgrade their skill set from what I have seen in the industry over the last 20 years.

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By Rod Wilson
09th May 2024 15:59

HMRC has an example that includes manual entries, see extract from example 4 below taken from VAT notice 700/22:

"Individual daily sales reports are created from individual tills, detailing the daily gross takings (DGT). This information is printed, scanned and emailed to the head office from each site and manually entered into an accounting software upload application."

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