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Record keeping re MTD for VAT

Scope of HMRC requirement re record-keeping

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A client maintains a handwritten cashbook that records all business activity and is reconciled to the business bank account.

To comply with MTD for VAT, they have created an Excel spreadsheet onto which they record only transactions that include an element of VAT.

As required by HMRC, formulas are used to calculate VAT totals and the VAT related information is submitted via approved bridging software.

Aside from the obvious drawback of creating extra work and the possibility of mis-posting figures from the handwritten cashbook to the Excel spreadsheet, is it acceptable with HMRC that only VAT related transactions are digitally recorded ? 

Replies (8)

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By GHarr497688
13th May 2021 21:25

Why don't you ask HMRC ?

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Jason Croke
By Jason Croke
13th May 2021 21:28

Doesn't sound MTD compliant.

You need to read the Notice, https://www.gov.uk/government/publications/vat-notice-70022-making-tax-d... and section 4.3 specifically.

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By Paul Crowley
13th May 2021 23:33

Why does client not put all bank entries onto spreadsheet?

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Replying to Paul Crowley:
Jason Croke
By Jason Croke
14th May 2021 07:05

If businesses excluded all their exempt, zero rated and outside the scope sales from their VAT returns, those returns would paint a very different picture. Box 6 and Box 7 would be totally inaccurate and in no way match year end turnover and expenditure. That is why MTD was introduced, to make things more accurate.

Why are some sales without VAT? If zero rated, zero rate is a rate of VAT.

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By johnhemming
14th May 2021 07:08

It strikes me that if you include the zero rated items to get the boxes 6 and 7 right then it would be compliant.

It is, however, probably easier over time to simply do the cashbook electronically.

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RLI
By lionofludesch
14th May 2021 07:28

Even if it's OK now, it won't be soon.

Time to bite the bullet.

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By ireallyshouldknowthisbut
14th May 2021 09:26

if hand written, I would start with "are they digitally excluded"?

HMRC seem quite happy to exempt people for not much of a reason. Age will do it. Over 60? Bang, problem solved.

So long as the VAT is right I would not worry too much myself. HMRC cant even get CT rebates back, I don't think they will be spending hours on end checking to see if your client is or is not using manual books well hidden from their view.

Always look at total penalties + risk of being caught before changing something like this.

ie nothing without a warning + negligible,

Quite frankly the compliance costs of getting software, training and all the rest would dwarf even the biggest possible penalty here even if HMRC find 20,000 staff to investigate this stuff, so unless there is a business case for switching, then help your client make a commercial decision on your compliance with this rule.

Spoiler : I dont have a brass plate of my registered office address outside my home. There is no enforcement of this rule, so I don't bother with it.

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Morph
By kevinringer
21st May 2021 13:10

They must record all their VAT transactions; this includes zero rated and exempt. But they are only required to record VAT transactions. They are not required to record transactions which do not have VAT implications eg drawings. Currently I have loads of clients who have spreadsheets for VAT transactions: basically the excel equivalent of the VAT book. They will need to do more than this when MTD ITSA starts but given the pressures many are currently under with Covid and Brexit I'm not getting them to change their record keeping now. Some may well have packed in by March 2023 and I plan to obtain exemption for others.

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