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Record Keeping under MTD

Do expenses need to be recorded under MTD if there is no VAT claimed?

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I have a client who needs to keep records digitally now under MTD. He is not going to complete Excel (or any other software) himself so it’s down to me. The question is how much detail do I have to record?

He is a consultant working for a partnership. He spends most of his time marketing the partnership, both here and abroad (mainly USA), so his expenses are generally travel, entertaining and subsistence. He recharges all these to the partnership along with his consultancy fee and charges VAT on the whole amount. No input tax is claimed.

My issue is how much of the recharged expenses do I need to record individually, if at all, as there could be over a hundred each month, some for quite small amounts. Part of me thinks that as most of the expenditure is in the US and therefore not subject to VAT and he is not claiming any VAT on UK expenditure these amounts do not need to be recorded but the other part of me thinks that as this expenditure is forming part of his turnover it should be recorded. I have read VAT Notice 700/22 and am still as confused as ever.

Anyone have any insight into this as it is really doing my head in.

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By Matrix
10th Jul 2019 20:30

You say he is a consultant, is he self-employed? What records does he currently keep to enable you to complete his tax return?

The expenses would need to go in box 7 plus you would need to include the reverse charge if it applies. So you will need to include the expenses in the digital records to generate the correct figures in each box of the VAT return. This will also help since you can use the same records to complete the tax return.

What were you/he doing before MTD? Do you think the returns were correct?

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to Matrix
11th Jul 2019 13:55

Thanks for replying
The self-employed/employed is another issue which I won't go into here.

The only records kept are the expenses claims. He has very little other expenses (and yes I am aware this has an impact on the 1st point) other than some flight upgrades that the partnership won't pay for, so his tax return (which I don't deal with) is basically the income, less recharged expenses (I asked a question re this before and these are treated as cost of sales) and the upgrades.

I have generally worked on the basis that the expenses are outside the scope of VAT so no entry in box 7. This is probably the only issue that may be incorrect but believe the jury is out as to whether there should be an entry in box 7. There is no reverse charge involved.

So my question is do I still have to list all the expenses (down to the $2 parking in LA) in the "digital" record for VAT or perhaps just the UK element where no VAT is claimed but perhaps should be included in box 7.

This arrangement is only going to be lasting for the next year or so and then his income is likely to be reducing below the level for VAT so he can de-register (he is 70 next month).

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