Making Tax Digital for VAT
Tertiary legislation about Making Tax Digital for VAT (originally published in VAT Notice 700/22).
This legislation has force of law under the provisions of The Value Added Tax (Amendment) Regulations 2018 (SI 2018 No. 261) and The Value Added Tax (Amendment) Regulations 2021 (2021 No. 986), which amend The Value Added Tax Regulations 1995 (‘the regulations’). It was originally published within VAT Notice 700/22.
1. Supplies made
Where you need to apportion the output tax due on a mixed-rate supply with a single inclusive price, you do not need to record these supplies separately. You can record the total value and the total output tax due.
1.1 Supplies made by third party agents
Where a third party agent makes supplies on your behalf, those supplies do not fall within the digital record keeping requirements until you receive the information from the agent. Where the information is received as a summary document, you can treat this document as one invoice issued by you for the purpose of creating your digital record.
2. Supplies received
Where you’re claiming input tax on an employee’s or volunteer’s expenses, and that individual provides the combined value of more than one purchase, you do not have to record each purchase separately. You can record the total value and the total input tax allowable.
2.1 Use of supplier statements
Where a supplier issues a statement for a period, you may record the totals from the supplier statement (rather than the individual invoices), as long as all supplies on the statement are included on the same return and the total VAT charged at each rate is shown.
2.2 Petty cash transactions
Where a business uses petty cash to pay for small value items, these do not need to be individually recorded in the digital records. The business can record the total value and the total input tax allowable. This applies to individual purchases with a VAT-inclusive value below £50. The total value of petty cash transactions recorded in this way cannot exceed a VAT-inclusive value of £500 per entry.
2.3 Supplies received by third party agents
Where a third party agent makes purchases on your behalf, those purchases do not fall within the digital record keeping requirements until you receive the information from the agent. Where the information is received as a summary document, you can treat this document as one invoice received by you for the purpose of creating your digital record.
3. Charity fundraising events
Where supplies are made or received during a charity fundraising event run by volunteers, you may treat all supplies made as covered by one invoice for the event, and all supplies received as covered by one invoice for the event, for the purposes of the digital record keeping requirements.
1. Adjustments
Where the input tax claimed or output tax due on a supply has been changed as the result of an adjustment, you do not need to amend the digital record of the supply.
2. Correcting errors
Where a business makes an error correction using method 2, they’re not required to amend the input tax claimed or output tax charged recorded in the digital record of the supply.
1. Retail schemes
In addition to the records listed in paragraph 3.3 of VAT Notice 700/22, if you account for VAT using a retail scheme, you must keep a digital record of your daily gross takings (DGT). You’re not required to keep a separate record of the supplies that make up your DGT within functional compatible software.
1. Flat rate scheme
If you account for VAT using the Flat Rate Scheme, you do not need to keep a digital record of:
- your purchases unless they’re capital expenditure goods on which input tax can be claimed
- the relevant goods used to determine if you need to apply the limited cost business rate
1. Gold Special Accounting Scheme
In addition to the records listed in paragraph 3.3 of VAT Notice 700/22, if you make any sales under the Gold Special Accounting Scheme, you must keep a digital record of the following:
- value of sales made under the special accounting scheme for gold
- total output tax on purchases under the special accounting scheme for gold