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News added on 09.07.2019

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Will the latest MTD concessions help?

Most VAT-registered businesses have to keep digital records. HMRC has announced a relaxation of certain requirements, including petty cash. However, there are monetary limits, so how can you take advantage?

Purchase invoices. HMRC previously said that your business must digitally record all of its purchase invoices on an individual basis, showing the net amount of each invoice and input tax being claimed, even if you make a single payment to a supplier based on supplier statement totals. For some businesses, statements comprise up to 50 separate invoices. This requirement created extra work for businesses using the cash accounting scheme where input tax claims are based on payments made rather than invoice dates.

New rules. HMRC has confirmed that you can now digitally record totals from supplier statements as a single entry in your records, as long as you record the totals subject to different rates of VAT. If all invoices are subject to the same rate of VAT, as is usually the case, this means you will just make one entry to record the net amount excluding VAT and the amount of input tax being claimed.

Tip. If you take advantage of the new procedures, you must still be able to cross reference all supplies on the supplier statement to invoices received, but this can be done outside of your digital records.

Petty cash expenses. Digital record keeping for every transaction is not necessary if it would be “impossible, impractical or unduly onerous” . The update confirms that you do not need to digitally record every petty cash receipt, just the weekly or monthly totals being posted.

Trap. You can only post petty cash transactions as one figure if all individual expenses within the posting have a total VAT-inclusive value of less than £50, and the total petty cash posting is less than £500 including VAT.

As long as none of your petty cash receipts exceed £50 individually (£500 in a single batch), including VAT, you can group petty cash items together into single ledger entries instead of having to post each receipt.

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