VAT registered businesses who need to file VAT returns under the Making Tax Digital (MTD) rules, also need to keep all of their VAT records in a digital format. This can be in a spreadsheet or in accounting software.
You don’t have to take a picture of every purchase receipt, but you do need to record these three data points:
- Date of the purchase
- Net value of the purchase
- Amount of VAT to be reclaimed
Where you buy a lot of items from a supplier, you can record the totals from the supplier as a statement instead of all the individual purchase invoices. This helps you match your accounting records to your bank statement where you make one payment per period to each supplier. You can only use the supplier statement totals where all the invoices on the statement fall into the same VAT period, and the amount of VAT charged at each rate is recorded.
Petty cash transactions can also be a pain, as there tend to be a lot of small amounts. You can record all the petty cash expenditure as a single digital record, if the total amount is no more than £500, and the individual purchases were each no more than £50.
Where the purchase invoice is received digitally as a PDF or word file, you don’t have to suck that information into your accounting system digitally, you can retype the key details. However, once the data is within your accounting system it needs to be digitally transferred to the VAT return via digital links, without further retyping, or by cut-and-paste, or copy and paste. There is a relaxation of this rule for the first 12 months of MTD.
We can help you set up your accounting system so it complies with the MTD regulations.