I recently received a letter from HMRC telling me that all UK businesses will be required to use MTD from the 1st of April 2022 regardless of their turnover.
I am very happy to see that Quickfile is compatible with this procedure. But I have 2 questions:
(1) What information does HMRC extract for this accounting system? Could they eventually get access to my bookkeeping also for the period previously to start using MTD?
I always used Quickfile to get my business calculations for VAT Returns and Corporation Tax, with “simplified” invoices, but not as a detailed bookkeeping system. For example, I make just one “sale invoice” for all the sales of a month, where I specify the correct VAT settings, amounts, and account code, but where I don’t fill in the description of each item sold. In this way, at the end of each VAT period, I simply get the numbers to put in my VAT return or to make my year-end accounting. This is because I sell only on online marketplaces, so I can already find the detailed information there when needed, but I generally don’t need that to make my returns, not until now. So which information does HMRC extract for this system? Could they eventually get access to my bookkeeping also for the period previously to start using MTD?
(2) Is HMRC able to see the changes under “Recent Events”?
My business is very small, I make my own bookkeeping each month but I always check everything once more before submitting my VAT returns. Sometimes this leads me to correct some details in the payments or invoices. I can see all these changes recorded under “Recent Events” in the Dashboard and under each invoice. Does HMRC see these updates too? And if so, do they see that also for all the bookkeeping previously to start using MTD?
Perhaps it would be wise to read up on what Mtd means.
It a way of keeping digital records and submitting the figures to hmrc. It doesn’t give them more ability to look in to your records. They already have that under enquiry rules.
But as Paul hints, “use MTD” means more than just submit the final return using compatible software, it means you’re supposed to keep your accounts records in digital form with no manual transcribing of figures after the first point where you record each sale. You can keep your records in one piece of software and submit your return with another, but the link between the two must be digital (e.g. export a CSV from one and upload it into the other), not a manual entering of totals.
Keeping your primary records outside QuickFile (on paper or in other software) and then manually creating one QuickFile invoice per month/quarter won’t cut it if they ever inspect you.
I get that I should start to keep all my bookkeeping on a single software starting from April 2022 and that HMRC only gets the final figures for the VAT returns, unless they inspect the business. So, in case they ever need to make an inspection, what I would like to understand better is:
(1) Am I required to remake all my bookkeeping also for all the periods previous to April 2022 so that all that is also kept digitally?
(2) I forgot to mention that, considering that I recently started to use the Retail Flat Rate VAT Scheme, I already stopped making Quickfile sale invoices with totals each month. Instead, now I do that daily (called “daily takings” in VAT notice 733-10.1), but I just put the total amount of the sales and VAT for that day and put “Goods sold” in the description. Should I break down the sale invoice by the items sold instead (as in an actual invoice)?
(3) Are they able to see any update under “Recent Events”? For example, I create an invoice and its payment, then I immediately realize that I made a mistake somewhere and I fix it. This normally appears under “Recent Events”. Is HMRC able to see it?
I would think that it’s only a requirement from the date it’s enforced. If MTD comes in on April 1st 2022, the records would only need to be digital from that date.
However, it’s always worth double-checking with your accountant to be sure.
The key with MTD is not just the submission of VAT returns and other tax-related documents digitally, but also the records. The question you should be asking yourself, is “if HMRC queried where that number came from, could I prove it, and is there a digital link?”
With retail, I would assume you’re using a till system of some sort, which should give you a report of your takings. Using this report to generate the invoices, for example, would help you go in the right direction of MTD requirements.
So, in short, a total is fine, providing it’s derived from a digital link.
No. HMRC only sees the figures in the boxes on your VAT return, along with a period key which links it to the relevant VAT period. No other data is shared with HMRC as part of MTD.