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MTD and Digital Records

15 November 2018

by Gareth Costello, Senior Tax Manager at DTE

HMRC has clarified that records that are not required to complete a VAT return (or are not specified in VAT Notice 200/22) do not need to be kept in functional compatible software.

The VAT (Amendment) Regulations contain the provisions with regard to recording and keeping of information in electronic form:

  1. The name of the taxable person.
  2. The address of the taxable person’s principal place of business.
  3. The taxable person’s VAT registration number.
  4. Any VAT accounting schemes used by the taxable person.
  5. For supplies made/received by the business during the period:
  • The time of supply.
  • The value of the supply (excluding) VAT.
  • For supplies, the rate of VAT charged.
  • For purchases, the total amount of input tax for which credit is allowable.
  • For outputs, HMRC guidance states: “Where you need to apportion the output tax due on a mixed rate supply with a single inclusive price you do not have to record these supplies separately.”

HMRC accept that not all software will allow a business to record a rate of VAT other than the standard, reduced, zero or exempt. If this is the case, the mixed supply should be recorded as either one standard-rated supply and one zero-rated supply for example or the business can record the sale
at one rate and correct the VAT through an adjustment at the end of the period. Businesses will also need to do this if they are using a margin scheme or the flat rate scheme.

For inputs, if more than one supplier has been included on the invoice then the total of all the invoices can be recorded.

Only supplies that need to be recorded in VAT return figures need to be included and supplies that do not go on the VAT return do not need to be recorded in functional compatible software. For example, intra-group supplies for a VAT group are not covered by these rules. A digital record of “outside the scope” supplies is only required if these need to be included in the VAT return figures.

HMRC states that if the amount of input tax that will be claimed is unknown at the time the supply is entered into the business records, then the business can record:

Records, such as a C79 (Monthly Import VAT certificate) or a purchase/sales invoice must be kept in its original form so not all records can be held solely in digital format.

  • “The total amount of VAT and adjust for any irrecoverable VAT once calculated.
  • No VAT and adjust for any recoverable VAT once calculated.
  • VAT recoverable based on an estimated percentage and adjust for any VAT once calculated.”

Where an invoice includes supplies with different times of supply that are within the same VAT period, all of the supplies shown on the invoices can be recorded using the same date. HMRC guidance advises “where you are claiming input tax on employee expenses and your employee 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 due.”

Records, such as a C79 (Monthly Import VAT certificate) or a purchase/sales invoice must be kept in its original form so not all records can be held solely in digital format.


Gareth Costello

Senior Tax Manager at DTE

Gareth is a senior adviser in the DTE Tax department. Having worked at a combination of top ten accountancy firms and smaller independent tax advisory boutiques, his focus throughout has been supported and advice to owner-managed businesses and their owners on tax matters.

 View Gareth's full profile

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