Blog Making Tax Digital - PGM Guide

4 weeks ago

Author: PGM Accountants

Making Tax Digital - PGM Guide

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Making Tax Digital (MTD) for VAT comes into effect for most businesses with a turnover above the VAT threshold in April 2019. In order to clarify HMRC rules we have prepared this short summary of the main requirements.

  • Businesses that are voluntarily VAT registered do not need to join MTD regime.
  • First submissions under MTD apply to:

VAT Quarter

Period covered

Deadline for submission

QE June 2019

1 April – 30 June 2019

7th August 2019

  • It is up to business owners to decide what software they use for their digital record keeping. Excel spreadsheets are still acceptable however bridging software will be needed to link the spreadsheets to the VAT return submission process.

You can use a selection of cloud accounting packages that are MTD ready eg. Xero , Sage One or QuickBooks.

If you’re currently using Excel spreadsheets we can help with submitting your VAT return using our bridging software.

If you’re thinking about using Cloud accounting, we can help with choosing the right software for your business or we can do the bookkeeping for you.

If you’re an existing Xero client of PGM – there is nothing you need to do. You are MTD ready.

 

Recording sales

Cash businesses – there is no need to record every sale that is made to a customer but daily gross takings figures must be recorded in a digital format.

          Invoice-based businesses:

  • Each invoice must be recorded separately
  • Handwritten invoices are still acceptable, however they have to be recorded in a digital format.

Recording purchases

Purchase invoices must be also recorded digitally unless the business uses the flat rate scheme.

 

What information needs to be recorded digitally?

Sales invoices

Purchase invoices

  • Invoice date
  • Net amount
  • Rate of VAT
  • Amount of VAT
  • Invoice date
  • Net amount
  • Rate of VAT
  • Amount of VAT

The net figures subject to different rates of VAT must be recorded separately.

Example

A business raises a sales invoice to a customer for zero-rated Product A (£50) and standard rated Product B (£60 + VAT).

The total net sales amount is £110 + VAT £12.

The record of this sale should look as follows:

 

Date

Invoice number

Net amount

VAT rate %

VAT amount

Gross amount*

01/04/2019

INV-0043

50

0

0

50

01/04/2019

INV-0043

60

20

12

72

  • We would advise you to keep record for gross amount however, this is not mandatory.
  • It is not allowed to batch invoices together and make one entry based on a payment or statement total.
  • It is important to note that despite the new more detailed way of recordkeeping for VAT, HMRC will still only receive the total figures from the nine boxes on the return.

If you have any questions in relation to MTD VAT rules please contact us and we will be happy to help.