Making Tax Digital – important updates
The VAT notice for Making Tax Digital (MTD) has been updated, relaxing the rules to help clients.
But what has changed, and what does it mean for clients?
A further update is set to benefit clients who receive a high volume of purchase invoices from the same suppliers, such as firms in the construction industry.
Some firms will be able to post supplier statement totals instead of every individual invoice.
However, if businesses wish to adhere to this new system then they should note that all supplies on the statement must relate to the same VAT period, as well as showing the total VAT charged at each rate.
Client businesses that use the supplier statement totals will need to cross reference all supplies to the invoices that they have received, which can be done outside of the digital records for MTD.
The latest addition to the Making Tax Digital VAT notice relates to petty cash.
The update focuses on the record keeping in relation to petty cash. Currently, clients should record every individual supply received in their digital records, which includes small purchases such as tea or biscuits, which can become time-consuming.
HM Revenue & Customs (HMRC) will now accept a client combining several petty cash purchases together as one single purchase.
However, the value of this is capped. Individually the petty cash items must cost less than £50, VAT inclusive, and a batch of items must cost no more than £500, VAT inclusive.
The business must then record the total value and total input tax allowable.
The final relaxation of the MTD rules relates to third parties. This could benefit clients who let property through an agent.
The monthly summary of rent collected and VAT charged can be used as though it is a single sales invoice in order to create its digital record form.
Transactions can also be grouped together, providing that they are in the same VAT period and are charged at the same VAT rate.