The latest MTD policy update released by HMRC has announced that it is now possible for a supplier statement to be used when recording expenses for VAT purposes.
This is an excellent step towards making tax digital, as it allows an increasing number of businesses to adopt quick spreadsheet accounting techniques. The new update has been introduced to all UK businesses which make annual tax supplies amounting to more than £85,000, within the VAT period beginning either on or following 1st April 2019.
Issues With Supplier Statements
This is a welcome change to businesses across the country because if previously a business recorded expenses using both cash accounting schemes and digital forms of spreadsheets, they would still need to record every purchase invoice in a digital format.
This method proved itself to be unnecessarily time-consuming, as it is common for a business to make a single supplier payment based on the total of numesrous invoices. In these scenarios, businesses were often choosing to make a single line entry within a spreadsheet covering the payment total. In addition, within a cash accounting scheme it was only possible to claim input tax on payments made to a supplier.
The Updated MTD Policy
HMRC's policy on MTD continues to evolve, with a number of updates released over the previous year. The latest VAT Notice 700/22 was released on 5th May 2019, with a positive announcement relating to supplier statements.
The changes mean that if a business chooses to use spreadsheet accounting, supplier statements can be used as a way to record business expenses for input tax. Although, if the statement refers to different rates of VAT, the individual totals which relate to each rate of VAT should still be recorded separately.
For example, if a business purchases materials from a supplier amounting to £1000.00 (standard rated) and later in the month makes another purchase of £100.00 (also zero rated), at the end of the month the supplier statement would show purchases made totalling £1100.00. Following the HMRC update, if the business is VAT registered, uses the cash accounting scheme and records its expenses within a digital spreadsheet they will now be able to make a single accounting entry.
The Impact On Petty Cash Expense Recording
In addition to the above benefits, the updated HMRC notice confirms that it is now possible for petty cash expenses to be recorded as a single amount if the total is below £500.00. However, this does not apply if a receipt within the posting is above the amount of £50.00.
To find out more about our tax services, please contact our experienced team today.
Image source: Pixabay
