What are the digital record keeping requirements for Making Tax Digital?

To comply with MTD, it won’t be the case that businesses will be required to scan and store invoices and receipts digitally, more so, businesses must ensure each individual transaction is recorded and stored digitally and can be viewed as a stand alone transaction. Whilst HMRC have stated that it would prefer records to be updated in real time, they will allow records to be created digitally at monthly or quarterly intervals.

So what is required to be kept digitally ?

Designatory Data:

HMRC require the following information within your first quarterly update, and any changes much be included in the subsequent quarterly update.

  • The name of the business or organisation
  • The address of the principal place of business
  • The VAT registration number
  • Details of any VAT accounting schemes used.

Sales and Supplies:

For each transaction, it is necessary to maintain records that show:

  • The time of the supply (the tax point date)
  • The value of the supply
  • The rate of VAT charged

Purchases:

For each purchase invoice received, it is necessary to record digitally:

  • The time of supply (the tax point)
  • The value of the supply including VAT not recoverable by the business
  • The amount of input VAT to be claimed

The VAT account or summary data:

This is the most important part of the digital business record as this is what will be used to by the software to calculate and populate the VAT return.  To show the digital link between the output tax in the records and the output tax on the return, the business must have a digital record of:

  • The output tax owed on sales
  • The output tax it owes on acquisitions from other EU Member States
  • The tax it is required to pay on behalf of its suppliers under the reverse charge procedure
  • Tax that needs to be paid following a correction or an error adjustment
  • Any other adjustment required by the VAT rules

In addition, to show the link between the input tax in the accounting records and the input tax on the VAT return, the business must have a digital records of:

  • The input tax it is entitled to claim from business purchases
  • The input tax allowed on acquisitions from other member states
  • The input tax allowable under the reverse charge procedure
  • The tax it is entitled to following a correction or an error adjustment
  • Any other necessary adjustments required by the VAT rules.

Easements:

There are certain simplifications for taxpayers using one of the following:

  • Retail Schemes
  • Flat Rate Schemes
  • Margin Schemes
  • Records maintained by third parties

If you need any help with getting your business MTD for VAT compliant, then please contact your usual Harrison Beale and Owen contact or Jessica Mason on 02476 306029.