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MTD for VAT: Countdown to full roll-out

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Neil Warren provides ten practical tips to help accountants and their clients prepare for the extension of MTD for VAT to all voluntary registered businesses from April 2022.

16th Nov 2021
Independent VAT Consultant
Columnist
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Legislation

Love it or loathe it, MTD for VAT will be extended to voluntary VAT registrations for periods beginning on or after 1 April 2022. Businesses and organisations with annual taxable sales between £0 and £85,000 must join the MTD club, if they are VAT registered.

The legislation was amended by SI 2021/986, which removes voluntary registrations from the list of entities that do not need to comply with MTD – Reg 32B, VAT Regulations 1995 – with the deletion of paras 2 to 5 about exemptions.

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Replies (23)

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By Paul Crowley
16th Nov 2021 14:34

All sorted
Both VAT volunteers have their get out of MTD letters ready
One is on the flat rate scheme operating in paper
The other a small subcontractor and, guess what, operating in paper

Odd really as both go onto the internet thing to file the report digitally on the HMRC website

Thanks (2)
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By Hugo Fair
16th Nov 2021 18:21

"Spreadsheet accounting will be acceptable, as long as there is bridging software in place to link the VAT totals on the spreadsheets to the figures declared on the electronic VAT return that is submitted to HMRC. There must be no typing or retyping of the figures."

So what is the difference between being non-compliant (changing a figure in the submission software) VS. being compliant (despite changing the figure in the spreadsheet before 'bridging')?

Thanks (5)
Replying to Hugo Fair:
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By Paul Crowley
16th Nov 2021 23:00

Given the very few occasions that clients get VAT visits, HMRC will probably never know anyway.
The difference that we notice is that spreadsheet versions are easier to logic check when client does the bookkeeping.
I did have a chat recently with a client that had bought a 'pool' car since year end
and claimed the VAT
They use sage and submit themselves. Cannot blame sage for that one.
Entered on notes for next year

Thanks (0)
Replying to Hugo Fair:
By Duggimon
17th Nov 2021 09:58

Hugo Fair wrote:

So what is the difference between being non-compliant (changing a figure in the submission software) VS. being compliant (despite changing the figure in the spreadsheet before 'bridging')?

Changing a figure in the submission software is not compliant. Changing a figure in the spreadsheet before bridging is also not compliant. Changing a figure in the spreadsheet is only allowed if the spreadsheet is the only version of the records, everything else is non compliant. If figures need changed they need to be changed in the primary records.

Of course, HMRC currently have no way of checking whether anyone has done anything to the spreadsheet they shouldn't have, so it's entirely on the honour system.

HMRC neglected to mention in all their briefings that the honour system is being used to achieve the massive reduction in errors in VAT reporting that they have predicted.

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Replying to Duggimon:
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By Hugo Fair
17th Nov 2021 11:39

"If figures need changed they need to be changed in the primary records" is indeed my understanding (if only because otherwise the whole thing is entirely nonsensical).
BUT how many people understand that (including HMRC)?

And for most of the taxpayers likely to experience the greatest difficulty with all this technology, the spreadsheet is in fact likely to be their primary 'digital' record (as figures will be entered here from paper statements/receipts/etc and possibly even the hand-written cashbook).
So they are being forced to undertake extra effort/actions (and probably costs) without ANY improvement in digital record-keeping ... or the supposed consequential benefits.

FWIW it's not true at the other end of the spectrum either.
If, for instance, your bank records are primary digital records but are 'mis-posted' by Auto-entry (or include non-business items etc) ... then you HAVE to amend these further down the digital chain - but doesn't that break the rule of 'no change other than in primary/source records'?

Thanks (2)
Stepurhan
By stepurhan
16th Nov 2021 23:23

Neil Warren wrote:
The aim of MTD for VAT, as far as HMRC is concerned is to “tackle the tax gap caused by errors and failures to take reasonable care.”
What evidence have you seen that this happens in practice?

I am just working from people using digital solutions that "claim" VAT on everything, which seems to indicate that reality is in opposition to HMRC's assertion. (Obviously we correct their misapprehension once we become aware of it) Have you seen legitimate evidence to the contrary, or are you just spouting the party line?

Thanks (5)
Replying to stepurhan:
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By Paul Crowley
17th Nov 2021 02:23

I do not think Neil believes a word of it, hence "fingers in the air"

We find more errors in autofeed and software than spreadsheet records.
Not deliberate just misuse, trusting the software and VAT code error
People that use the actual invoice or calculate VAT and who have done so a while tend to get it right

Thanks (7)
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By Ben Alligin
17th Nov 2021 09:56

It must be a pretty empty spreadsheet if no typing or retyping is allowed?!

Perhaps you could clarify.

Thanks (1)
By Duggimon
17th Nov 2021 10:00

I have no clients who are voluntarily registered and who don't keep digital records. I would imagine there aren't a huge number out there, Paul's two excepted.

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By Paul Ashby
17th Nov 2021 10:10

I have a client who is 65 - very set in his ways and has always kept his records using a manual cash book - He is loo0king to retire at 67 so does not feel confident moving over to a computer based system for 18 months.

He could deregister as he is under the threshold but would lose a lot of imput VAT - Would his situation be grounds to apply for an exemption.

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Replying to Paul Ashby:
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By Paul Crowley
17th Nov 2021 10:38

Apply would be my opinion

Thanks (2)
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By johnjenkins
17th Nov 2021 12:28

I was just reading the posts and "Everybody Hurts" by R.E.M. came on the radio.

Thanks (1)
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By whiteways
17th Nov 2021 19:32

I have just one client who is voluntarly registered and who's records are on Excel. I have no clue where to start.

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By whiteways
17th Nov 2021 19:32

I have just one client who is voluntarly registered and who's records are on Excel. I have no clue where to start.

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Replying to whiteways:
My photo
By Matrix
18th Nov 2021 05:57

Bridging software

Thanks (1)
Replying to Matrix:
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By Paul Crowley
18th Nov 2021 14:04

+1
If he cannot find a reason to be digitally excluded

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Replying to Matrix:
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By whiteways
18th Nov 2021 14:27

Matrix wrote:

Bridging software

I’ve heard of it, but I have no clue how it works or what I have to to. Does it pick out the right numbers by magic?

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Replying to whiteways:
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By johnjenkins
18th Nov 2021 14:55

Huh Huh huh "Just like that".

Thanks (1)
Replying to whiteways:
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By Hugo Fair
18th Nov 2021 17:53

Unfortunately not ... although I like the idea of employing Tommy Cooper to perform book-keeping duties (it seems appropriate to the degree of seriousness with which MTD is being treated).

Although the actual actions are obviously dependent on the software chosen, you will always to go through some sort of 'mapping' exercise first (in essence you tell the bridging software where it will find certain figures within your spreadsheet).

This is just so that it is the bridging software (rather than your spreadsheet) that performs the actual submission to HMRC.
It's a bit like taking a selfie of you handing a recorded delivery envelope in at the PO, so that you have a piece of 'proof of posting' evidence (even though the PO gives you a receipt anyway) ... go figure!

Thanks (1)
Replying to Hugo Fair:
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By johnjenkins
19th Nov 2021 09:11

I think when you look at QU and all the paraphernalia surrounding software, what they can do for the small business, and we all know it's a load of tosh, then there comes a time when taking MTD (considering HMRC can't answer the phone or deal with queries) becomes a joke.

Thanks (0)
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By whiteways
18th Nov 2021 15:28

Tommy Cooper impressions... Thanks, that helps a lot!

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Replying to whiteways:
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By johnjenkins
18th Nov 2021 16:22

When you put "magic" I was going to do a "Queen" impression but Freddy's a bit hard to imitate. I could've said "you'll like this" but not a lot" which may have been the better option. I'll let you decide.

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By AndrewV12
24th Nov 2021 10:28

A good article to keep us up-to-date and on our toes, my gosh didn't 2022 come around a lot quicker than what we thought :(.

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