Hi. Yes I'm afraid another MTD for VAT question. I've asked many times questions regarding software as I must admit- it has caused me so much stress and worry as we currently keep manual records for our few VAT registered small business clients (mostly retail). I've read up so much and attended all the HMRC webinars on it and I am now considering my easiest option for clients that are anti-technlogy and cash strapped would be an excel add on type programme- possibly absolute tax's excel filer.
So.... If my client kept an excel spreadsheet with a sheet for daily sales (retail), and a sheet for expenses (ensuring he keeps tax date, vat rate and gross value within the spreadsheet) and then emails me (his agent) this- is that a digital link? I believe from what I have read it is. If they then provide me with a manual copy of their bank statament and I add in to the expenses sheet any expenses they have omitted to include such as bank fees or direct debits like rates- is this still acceptable? If I manually adjust any glaring errors (obviously after checking with the client if they have the paper copy of invoices that these are indeed errors) is this still OK- providing of course that the finished spreadsheet is then emailed back to the client and saved as their digital record of income/expenses? As long as formulas are used on a further sheet to the spreadsheet to get totals for the VAT return from the other sheets and then linked using a MTD VAT compatable product such as absolute excel filer, I am assuming this is all OK?? I am so sorry for my naievity- I have spent so long on this but as a bit of a technophobe myself I am struggling and would greatly appreciate any comments on this. Many thanks.
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I would say that yes, this would comply. Indeed, I am thinking of offering a service to my clients in which I will submit their returns on their behalf provided they keep the basic records on Excel and my bridging software lifts the Excel data and makes it ready for transmission to HMRC.
At the moment, I only do VAT work for a small percentage of my clients. Most of my clients, with my encouragement, roll their sleeves up and do their own.
This may change under the brave new world of VAT MTD as many will be reluctant to buy what they consider to be unnecessary software that adds nothing of value to their business.
My main concern is of a professional nature. If I am going to start submitting VAT returns for many more clients -
a) how much effort should I, as a VAT filer, put into checking and verifying the records provided by the client before pressing "submit"?
b) what effect this has on Professional Indemnity
c) what type of wording should be included in Engagement Letters to cover this new form of work?
d) time - there are only so many hours in the day and this could and probably will place me under a lot more time and deadline pressure
You're getting hung up on inconsequential details. The key point is the digital link between the underlying records (where the individual transactions are separately recorded) and the submission to HMRC.
The emailing back and forth has no bearing on it as the finished spreadsheet is still the transaction level records and that's what's to be linked to the return. You could translate it into semaphore in the interim if you like, so long as there ends up a digital copy of all the transactions for the return, and this is digitally linked to whatever software files the return.
This is generally the way we have worked for the last 15 years or so with clients completing bespoke (fairly sophisticated) Excel 'Cash Books' on a monthly basis, emailing the file to us for checking and amendment where necessary and then we email the corrected file back to them for the next months entries. There are accumulative total summaries for the year to date and VAT summaries for each month/quarter automatically showing the figures to enter into each box on the VAT Return.
A similar system works for those accounting records we maintain for clients from their source records.
The current system is good enough to comply with the HMRC requirements with bridging software to submit to HMRC and that 'problem' has now been solved with TaxCalc providing bridging software as part of its package.
So for us, there will actually be very little extra work connected with MTD for VAT and also practically no additional cost, but I don't think we are typical of the significant problems that will face tens of thousands of others. It was only the desire to make things easier for us and our clients 15 years ago that leaves us sitting pretty today, and all without a Xero or Sage in sight!
Tornado
How are you dealing with multiple purchase invoices settled by one payment?
I have six vat registered retailers who use my sheets, these are likely akin to yours, sales recorded daily linking into a cash account and bank account (I need to adjust Amex charges for client) and monthly purchase sheets where client records payments either by cash or bank (two total payment columns) which link into the cash and bank recs.
The whole has summary sheets posting into an ETB and I adjust this at YE re prepaid/accrued/depreciation/stock etc
The sheets also link to quarterly vat return sheets where retail scheme adjustments and reverse charge corrections are made.
My catch is that in five of these cases multiple invoices are recorded on the payments as one line, a supplier might have a single payment settling up to say ten invoices.
I may be able to get the client to start paying each invoice as a single payment (Though clients will likely moan) but offsetting credit notes (a lot of goods get credits) will not be possible unless the sheets end up with multiple entries (name/date/vat/net), one re each supply, which is going to be very messy ensuring these square to total payment via say bank statement re checking.
How are you intending to deal with such scenarios using excel as a cashbook?
I suspect these are not going to work and my clients are going to need to embrace software.
DJKL
Most of our clients use Cash Accounting, which was specifically introduced by the then Government to make book-keeping easier for small businesses, and a philosophy which has been totally ignored by the current 'caring' Government in their MTD proposals. As far as I can see, however, Cash Accounting will still continue to be a valid scheme after April 2019 so there is clearly a confusion of ideas here.
At the moment, when a client pays multiple invoices (say a month end account) the instructions are to clip together all of the invoices/credit notes being paid in the single payment with a summary of the Net/VAT/Gross on a summary sheet on the front of the clipped together invoices. In practice, those maintaining their own records do this themselves and for those that we maintain the records, we usually prepare a summary sheet and clip that to the front of the invoices paid.
The single payment is then entered into the Cash Book as a single 'invoice' and the component parts analysed under appropriate headings.
I have not yet decided if it will be necessary to enter every individual invoice/credit note, but if this is legally required, then the process will be to enter the single payment in the Bank Column and then list each invoice and analyse under the appropriate headings until the payment has been fully allocated.
It may be that you are misinterpreting the requirements as I don't see any reason at all for invoices to be paid individually. The method I have described would record each invoice separately in the Accounting Records, but I don't think the method of payment is the crucial point here.
There will clearly be unnecessary extra work to do, but there is no particular difficulty with this, it will just cost the client more.
The 'spreadsheets' I use have internal links to automatically summarise key information at the end of each month (and the year end) so there are no further transfers required to obtain this on-going information.
I treat the year end accounts preparation as a separate exercise, however, with a different set of of integrated spreadsheets linked by macros using the information extracted from the Accounting records. I use my own Accounts templates for non-corporate entities and VT Final Accounts for corporate entities.
Based on what you have said, however, once the Cash Book has been completed, checked and is OK, the information from it can be used to prepare Final Accounts by whatever method you prefer.
Re the client paying each invoice individually this is not a requirement itself of the digital records required to be kept it is more the fact that I expect clients to write up the records themselves and they could possibly cope with each invoice being a payment more readily.
My role, which I am loathe to expand into writing up their books, has me merely correcting at period end what they have input into the sheets I have written for their use. I do not ,at my age, want to write up all their books, for me it is just not cost effective re what I could charge them and what I would in effect receive per hour. (my minimum re correcting books is circa £50 per hour so needs to be very few hours input to avoid my fees soaring beyond what clients will pay)
I do not believe I can readily give them an excel model that auto adds an indeterminate number of analysis rows to a total agreeing with say the amount on the bank statement.
My clients can usually enter data into excel as directed to do,they insert daily sales and enter vat ,net etc re payments, they can even usually manage to enter whether payment is cash or bank, but what I would not trust them to do is insert multiple lines into the analysis (one per supply) and then re each such set instruct excel to add the entirety where each entirety of standard/zero net and vat re same will be a different population size (number of rows)
This is not just odd bulked payments to deal with, five of my clients in retail (An extended family with shops) will each likely have between 20-30 payments a month, of these payments circa 50% will be to suppliers involving re each between 1-15 individual invoices/credit notes.
Re final accounts, the above excel sheets all link with an ETB (in one client's case I have set it up that the ETB flows to a set of management accounts), once ETB adjusted re year end I post ETB totals into Taxcalc re final accounts.
I am frankly thinking about getting out of the smaller fee market, the £1,000-£2,000 per annum jobs, and will likely only stay involved with those currently at the £5,000 and upward fee level , persuading a few of them to each take me onto payroll as an employee and thus escaping a lot of the grief practice brings (No engagement letters. no MLR registration, stuff CPD, no PII etc)
Thanks to all of you- phew! Sounds like this may well be the option suitable to our clients then. They do not currently keep double entry accounts and the thought of moving to a double entry type accounting software was not being met with great enthusiasm should I say- this appears to be a more subtle transition which may well be favourable. I may start using a low key package like clear books with one client and see how we get on and move the others to excel with the option to move them over to clear books at some point in the future when I've got more used to it! Thanks again for the input.
Just as an aside, I have been using TaxCalc for 2018 Returns and I am impressed with the software, value for money and support. If you are thinking about changing Tax Return and associated software, then TaxCalc may be a good choice.
Has anybody had any issues obtaining agent status for VAT MTD?
Does the agent have to go through a separate agent application process for each and every client for whom they will be submitting VAT returns?
Will existing VAT agent approvals become null and void once VAT MTD comes into effect for the relevant client?
I'm very confused about this. I followed two webinars about setting up an agent account and I have created one. However, when I log into it, I don't appear to be able to do anything with it! I have no services listed (I'm currently an agent for VAT, PAYE, CT & SA) and when I try to apply for these services I'm told I'm already signed up for them!
Anyone else had any experience with this new account?
I currently have exactly the same scenario. I've spoken with HMRC and they advised me that the services and related clients would populate at some point (but they couldn't give me any time frame on this).
Jumping on the back of this thread, MTD is also giving me a bit of a headache. I have one "client" for whom I do the VAT in more of a bookkeeper capacity than as an agent. He is a consultant for a firm (ex-partner heading towards retirement but still earning above the limit for registering for VAT). He issues a monthly invoice for fees and reimbursed expenses (and yes we are aware of the employee/self-employed implications) and there are no claimable expenses so at the moment the invoices are raised in word and I do an excel spreadsheet to add up the 3 invoices each quarter. Would this be sufficient to be classed as a "digital" record and then use bridging software to upload the data to HMRC? From reading other answers in this thread I think it would be but some confirmation would be appreciated.
I think it would.
I'm still unsure about having to record every single invoices, when we usually just record the payment as one lump.
Also, how long will we be able to use excel to satsify MTD- is it only for one year?
Lots of confusion over such a massive change.
At the moment anything prepared on Excel (other spreadsheets are available) will be allowable - provided the totals are transferred to this mythical "Bridging Software" before submission to HMRC.
Goodness knows where this is all headed. We know from the original permutation of MTD (currently sidelined) as detailed in 2016/17, HMRC really wants full details of every single transaction of every single business - so this is just the start.
The digital records require every individual supply detailed, albeit daily till takings are acceptable rather than each individual retail sale recorded.
That means each individual item say paid by a company credit card or each individual purchase invoice or credit note needs individually recorded within the digital records, a summary of the c/card statement recorded in excel will not suffice nor will a transaction entry grouping half a dozen invoices paid together via a bank transfer, each invoice (supply) requires to be individually detailed so excel cashbooks are going to be far more difficult to use going forward.
Accordingly not all excel records will be allowable only those arranged reflecting the recording of each individual supply.
Notice 700/22 at 3.3.3 is pretty clear what is needed in this regard.
The issue is not merely the total transfers via bridging software it is also what constitutes digital vat records.
I totally have the wrong end of the stick. I am under the impression that the MTD incentive is to stop any manual entries on to spreadsheets and/or bookkeeping software and that transactions are taken from bank feeds, sales and purchase receipts, whether they be digitally produced or a printed paper receipt from a high street store. Software is supposed to be able to take information from the receipts and feed it into the spreadsheet or accounting programme so that no manual inputting errors are made and that a traceable link is generated between the two by doing this. HMRC want to stop the errors made when manually inputting transactions, including those that claim input VAT from a VAT registered supplier that hasn't supplied their customer with a proper VAT invoice. I did not think that we would be complying with HMRCs MTD process if we were to still produce a manually generated spreadsheet to record transactions, even when using bridging software to transmit the information contained in the spreadsheet ready to submit to HMRC. I was totally under the impression that clients' (or myself) would have to be scanning any/all paper receipts/invoices they had and then using software that then would take the information from the scanned image and place it into a compatible spreadsheet so there was no manual input whatsoever. Please, somebody, confirm which is the proper method we will be expected to use...and the cheapest way too!
Manually created spreadsheets are currently fine but must contain the correct amount of detail - which in the case of purchases is all of the purchase invoices broken down by VAT code if there is more than one. I do not believe a monthly payment will suffice even under cash accounting. At a recent seminar HMRC confirmed that it is only once the records are digitised that the process starts so you could write up from a manual cash book for example.
Looking at the entries in this thread some of the spreadsheets will work some will not in keeping the specified records (even though they may correctly produce the figures for the 9 boxes).
Even with accounting software (such as QuickBooks) manually entered transactions will be OK it is a valid entry method - however once on a system all future transfers of data nust be digital which means no rekeying and no cut and paste to remove errors. So data can travel from a spreadsheet into accounting software back into excel for say VAT group combinations and then to HMRC via bridging software as long as the correct digital links are in place (either as digital exports from software or referencing one spreadsheet from another).
However I can recommend accounting software as a better way through. The scanning of records (which are read by software and posted automatically into the accounting software) along with bank feeds (either directly from the clients bank or via a spreadsheet download or even a scanned paper copy!) really do speed up entry and when set up properly improve accuracy. The software deals with accruals or cash accounting and the VAT FRS. THe key software companies are already approved by HMRC meanig their solutions work. You can have proper bank recs, full compliance and then management reports that the client can access themselves. As the data is alrgely in the cloud (but doesn't have to be QuickBooks desktop is MTD compliant) you can share tasks and data easily. If you can move to this point (which is accessible and affordable for both clients and practices) then you are moving forward into what is needed for full MTD should that come online. You are also offering the client a fuller richer service with less chance for errors than complex spreadsheets.
Just my view
Mike
"however once on a system all future transfers of data nust be digital which means no rekeying and no cut and paste to remove errors."
There is some confusion here in that no one would ever 'cut and paste' data from from accounting records held on a spreadsheet to another as this destroys data in the donor sheet. The process of transferring data would almost certainly be by 'copy and paste' which is an entirely different process and is a fully digital action. Indeed, copy and paste can only be done digitally.
At the moment I use a lot of macros to transfer information between spreadsheets. Basic macros are relatively easy to create with the Excel macro recorder and might be an alternative to copy and paste for some people.