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What will be the true cost of MTD4Vat?

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Posted by: Tony Margaritelli | Last modified on 17/05/2019

As desktop users running their own paid for accounting software have been asked frankly eyewatering amounts to “upgrade” it became apparent that their software providers were looking to push them over to their new cloud based products and the users quite quickly recognised that their salvation was to be found in bridging software.

Spreadsheet users having originally been told that they would be unable to continue were told that Bridging Software was their salvation also.

The result was that from nowhere, Bridging Software exploded onto the scene ranging from £nil to approx. £30 which meant HMRC etc could lock onto that figure and use it when asked about the cost to businesses of the introduction of MTD4VAT.

However, as we at the ICPA said the true cost was not the bridging software but the necessity to maintain a digital record of every supply. It was no longer possible to simply use the bank payment for example, to record the vat due on two or three or more invoices, each invoice has to be entered even though cash accounting for vat is in operation.

So, one invoice which in the past necessitated one bank entry now requires the invoice to be entered via the purchase ledger, the bank payment is to be entered and then be set against the invoice so effectively double the time for NIL benefit to the company and in fact nil benefit to HMRC.

Comments like “I get 150 invoices a month from Screwfix, wait for the statement, check the statement against invoices, attach them and make one entry Job done BUT now I’m going to have to make 150 individual entries” abounded and were persuasive.

Then 3rd May HMRC amended the rules in Notice 700:22 and the inevitable HMRC climb down appears but as is always the case with HMRC they just don’t get it right.

So, now we are able to await a supplier statement with it’s 150 entries for example and simply use the one entry method as before except that not any old statement will be permissible it must detail “the total VAT charged at each rate is shown” which in all honesty not all statements show because they are a payment chasing document after all. Also, this does nothing for a business that has an invoice and wants to make a single payment, should it wait for a statement to cut down on bookkeeping costs? What about the supplier how is their cash flow going to be affected? Is lots of businesses demand statements before making a payment? A good idea just badly drawn up which is actually what one could say about MTD as a whole.

Also, the cash payments compromise means no cash payment over £50 can be amalgamated and all payments duly amalgamated must not exceed £500 so again not exactly a thought through compromise.

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