Making tax digital - VAT etc

[melonfool]

Hi

Has anyone found any free software I can use to submit my VAT monthly? Apparently on MTD you have to have software, I can no longer just log on to HMRC and submit it.

Someone mentioned Vital Tax but that seems to be for Office 365 which I don't have.

Do I need to do anything with corp tax at all?

Ta

Mel

[johnhemming]

You don't have to do anything for corporation tax.

This is free if you take part in the pilot scheme (It is code I have written).
https://www.vat.direct/

At the moment there are detailed plans for various parts of MTD, but none for Corporation Tax and Brexit is dominating development time.

[melonfool]

That's fab, thank you - I think I am eligible for the trial, so I'll do my March return then sign up.

I've taken a permanent full time job so this will give me a year's grace while I decide whether to close my company anyway.

Thanks

Mel

[johnhemming]

I assume from the above that your company is not that active and probably does not have a turnover in excess of £85,000. If I am right then it is optional as to whether you get involved in MTD for VAT.

[melonfool]

I assume from the above that your company is not that active and probably does not have a turnover in excess of £85,000. If I am right then it is optional as to whether you get involved in MTD for VAT.

This current tax year not over £85k, no - in fact it has never been I don't think, not in one tax year. I registered as some of the types of organisation I work with will not work with companies that are not VAT registered and, initially, it was financially beneficial to be on the flat rate scheme but the benefits are negligible now.

So, if I'm not mandatory VAT then I don't need to do MTD?

That would be really good news, especially as I'm not expecting more than about £2k in the next financial year.

Mel

[johnhemming]

You don't need to do it.

[melonfool]

Mwah!

xxxxxxxx

Mel

[VitalTax]

VitalTax works with Excel 2013, 2016, 2019 for Windows, Excel 2016, 2019 for Mac, Office 365, Office Online and Excel for iPad.

[melonfool]

Hello Vital Tax!

How did you find us?



Mel

[Charlottesquare]

I assume from the above that your company is not that active and probably does not have a turnover in excess of £85,000. If I am right then it is optional as to whether you get involved in MTD for VAT.

This current tax year not over £85k, no - in fact it has never been I don't think, not in one tax year. I registered as some of the types of organisation I work with will not work with companies that are not VAT registered and, initially, it was financially beneficial to be on the flat rate scheme but the benefits are negligible now.

So, if I'm not mandatory VAT then I don't need to do MTD?

That would be really good news, especially as I'm not expecting more than about £2k in the next financial year.

Mel

The test re vat registration/deregistration is any rolling 12 month period not "tax year"

[johnhemming]

Making Tax Digital for VAT should be quite easy for anyone. There is no need to move to cloud accounting whatever the cloud accounting companies are saying. The Income Tax Self Assessment, however, changes quite a bit of how tax is handled by moving to quarterly submissions.

[Charlottesquare]

Making Tax Digital for VAT should be quite easy for anyone. There is no need to move to cloud accounting whatever the cloud accounting companies are saying. The Income Tax Self Assessment, however, changes quite a bit of how tax is handled by moving to quarterly submissions.

Not if you currently say operate a cashbook using excel, the requirements re what constitutes digital records within,

See the Value Added Tax (Amendment) Regulations 2018, at 7 (3) (b) re what needs to be recorded.

http://www.legislation.gov.uk/uksi/2018 ... ion/7/made

This means that two or more purchase invoices paid by one payment require to be entered as individual lines and cannot be entered into the digital records as a one line entry, most cash book type systems carved and modeled out of excel will not be compliant and most clients will be incapable of creating a compliant system as they go- in addition most have not got a clue as HMRC have not written to most of them, none of my clients have received HMRC notification of the changes from 1 April 2019.

In addition tricky little bits like accounting for reverse charge transactions, like Google Adwords but there are plenty of others, will have difficulty being adjusted via digital links, currently I deal with these via manual adjustment in excel but that will not be compliant in our Brave New World.

Right now I am mainly packing in and ensuring my clients are set up correctly for the future, I am currently looking for software that can deal with a business with five retail outlets operating vat retail apportionment scheme 1, have yet to discover what provider offers an untouched by human hand system that feeds direct from gross sales and purchase invoice allocation and does not involve an intermediate step sheet in say excel to do the calculations- any thoughts how your small corner grocer/CTN say can deal with this? (see post re same on Accounting Web if you know who offers software capable of the task)

MTD for vat is an badly thought through concept driven mainly by individuals who have very limited/ no direct experience dealing with the SME sector and little understanding what some constituents of same actually can manage to do and deal with.

On the plus side it has spurred me to give up general practice after over 30 years at the coalface.

[johnhemming]

As I understand it if you handle VAT on a cash basis then you will need to record two payments. I accept that there are limits as to the amount of turnover for dealing with VAT on a cash basis. If you are handling things on an accruals basis with a purchase ledger you should already have the VAT records being stored in the purchase ledger.

The details are in this VAT notice
https://www.gov.uk/government/publicati ... al-for-vat

Example 1
A business uses cash accounting and has paid the amounts on the invoice over 3 months. Two of the months are in the same VAT period so can be recorded together. The payments relating to the other month must be recorded separately. The precise manner of recording the information in different periods will depend on the software. This could be done by splitting the amounts out, or the software may allow one line to show different periods for the VAT to be recorded.

Hence if you have a cash book with payments including VAT you can use those figures in the separate periods.

[Charlottesquare]

As I understand it if you handle VAT on a cash basis then you will need to record two payments. I accept that there are limits as to the amount of turnover for dealing with VAT on a cash basis. If you are handling things on an accruals basis with a purchase ledger you should already have the VAT records being stored in the purchase ledger.

The details are in this VAT notice
https://www.gov.uk/government/publicati ... al-for-vat

Example 1
A business uses cash accounting and has paid the amounts on the invoice over 3 months. Two of the months are in the same VAT period so can be recorded together. The payments relating to the other month must be recorded separately. The precise manner of recording the information in different periods will depend on the software. This could be done by splitting the amounts out, or the software may allow one line to show different periods for the VAT to be recorded.

Hence if you have a cash book with payments including VAT you can use those figures in the separate periods.

John, the point is not re splitting payment for one invoice, it is the fact that a business may pay multiple invoices by one single payment.

If I get 10 invoices in from my builders merchant supplier in the month I will likely make one payment (A lot of builders merchants provide a handy statement with the net and vat analysed). Now in excel that might normally be one line being :

The Paid Total, The Total Vat, The Total Net analysed to columns re say purchases, small tools, equipment etc, as appropriate.

Now per the Act I cited there is a requirement, re what constitutes legally the digital records, to record each supply- in this instance each supply is each invoice I received, so I now need one figure total in the total column (to aid checking to bank rec otherwise I will need to add the ten together doing the rec which will be time consuming and messy) I need ten lines of analysis in the records to be compliant, one for each supply, and each line will need the actual date of supply as well as the date of payment.

Same issue applies with say a credit card statement from VISA settled monthly by direct debit, in a excel system each individual purchase, with its supporting vat invoice, is a distinct digital record to be individually recorded, the totals on the card may not be summarised and entered as one line in a cashbook, to do so is non compliant with the Act defining digital records.

Now a lot of accountants on places like Accounting Web look like they are going to pay lip service to the law where advising their clients operating on excel, however to me there lies PI ruin as the first HMRC enquiry that picks up that records did not comply the client is going to blame accountant for all costs re enquiry etc- you should have warned me etc. Aha, says accountant, I will, but in writing to client that he is not complying with the law, to cover accountant's back, by so doing the accountant just wandered into a MLR minefield, he is then a party to the client not complying with the Act and is complicit re that failure.

It is a rock and a hard place, I am not prepared to operate for clients ignoring legislation yet I know large numbers cannot do much better than keep the excel cashbook sheets I wrote for them and correct for them before vat returns submitted, my solution is to leave practice.

The whole concept is an ill conceived mess and will likely lead to poorer records not better re a lot of smaller clients.

[johnhemming]

This is an interesting point. I have been VAT registered in some form or other since 1983 and have also written software for accounting during that period. It raises a query with me, however, as to whether currently people are listing the information that is actually required. I, however, don't know strictly which rules apply.

[Charlottesquare]

This is an interesting point. I have been VAT registered in some form or other since 1983 and have also written software for accounting during that period. It raises a query with me, however, as to whether currently people are listing the information that is actually required. I, however, don't know strictly which rules apply.

Well surely from implementation it is as defined in the Act that modifies the 1995 Act that I linked earlier in the thread. This also accords with the HMRC vat leaflet 700/22

https://www.gov.uk/government/publicati ... al-for-vat, see 3.3.3

I read the legislation and guidance as clearly stating each supply needs detailed within the records . To be clear a supply is an invoice not a payment.

[johnhemming]

I know supply is an invoice not a payment. I am merely wondering what the previous legislation required in the records. That I don't know. The law has been changed to require records to be kept electronically. The question is whether it was previously sufficient to have a record with the total and somewhere else (on paper most likely) to have the individual invoices that made up the payment or whether in fact all of the invoices should have been detailed in the vat output register.

[Charlottesquare]

I know supply is an invoice not a payment. I am merely wondering what the previous legislation required in the records. That I don't know. The law has been changed to require records to be kept electronically. The question is whether it was previously sufficient to have a record with the total and somewhere else (on paper most likely) to have the individual invoices that made up the payment or whether in fact all of the invoices should have been detailed in the vat output register.

Input-it is the input vat in question.

HMRC never had an issue in practice, over the years I had a number of clients inspected where a cash book system was used re the inputs/payments side, the last one about 2-3 years ago they even complimented me on the records (visit upon registration, first return, as gave rise to repayment due to stock/fixed assets on hand at registration)

[johnhemming]

Sorry about the mistake. You are right.

I am not surprised if HMRC did not worry about it in practice, but there is always a question as to what the rules strictly said. I would not be surprised (because this is the way things tend to happen) if people were supposed to list all the invoices in the input register, but didn't and HMRC were not worried. I would assume this would be the same with MTD. After all we are not doing SAF-T.

[Charlottesquare]

Sorry about the mistake. You are right.

I am not surprised if HMRC did not worry about it in practice, but there is always a question as to what the rules strictly said. I would not be surprised (because this is the way things tend to happen) if people were supposed to list all the invoices in the input register, but didn't and HMRC were not worried. I would assume this would be the same with MTD. After all we are not doing SAF-T.

I think 31 and 32 are relevant sections of 1995 Act but have only skimmed as need to do some actual work today.

https://www.legislation.gov.uk/uksi/199 ... tents/made

Whilst all invoices etc required to be kept really no rules re how and the Vat Account merely needed summary totals- in effect no prescribed manner. This lack of definition could upset HMRC as tricky for them to argue registered person had not kept proper records- the new regime details and gives a benchmark to test whether taxpayer has met their obligations, hence my concerns, this is a Brave New World and HMRC love a penalty.