Manually inputting paper records to comply with MTD
Q: My client buys and sells large volumes of small value goods from a large number of suppliers. He is caught by the MTD rules, but is struggling to meet the purchase requirements as he does not post most of his individual purchases into his ledger. Historically he has captured most purchase data in summary based on monthly supplier statements and petty cash balance reconciliations. He has the underlying paper invoices / receipts, but does he really have to manually input this large volume of purchases into his digital records?
A: Possibly not. HMRC relaxed the requirements on this in early 2019 and updated their guidance in Notice 700/22 sections 18.104.22.168 (supplier statements) and 22.214.171.124 (petty cash purchases). Digital recording of the supplier statement totals is sufficient "provided all supplies on the statement are to be included on the same return and the total VAT charged at each rate is shown". For petty cash purchases, the business can use summary totals covering a number of individual purchases each with a VAT-inclusive value below £50, as long as the overall summary entry covering those small purchases does not exceed a VAT-inclusive value of £500 per entry. There may therefore need to be a number of petty cash entries made, but significantly less than having to post every single petty cash purchase.