Under the new HMRC regulations we are now coming towards the end of the soft landing period (being 12 months after the business commenced submitting VAT returns via the method in April 2019).
There is a significant change to how sales and takings should be entered into your accounting software from your Vet System.
As an added requirement you now also need to record your sales report from your Vet System, for the month/quarter, along with the ‘takings/customer receipts’ reports in a new way. Rather than posting the totals for the month/quarter into your bookkeeping software you must now post each item individually, which must be done via a digital link.
If your Vet System does not have a digital link set up with your accounting software then it should have the capability to export the required reports as a csv file. In this instance, if you prepare VAT on an invoice basis, you will need to export a copy of your itemised work done report as a csv file and use this to post your invoices by uploading the csv file into your accounting software. To record takings you will need to export your itemised takings/customer payments report into a csv file and then upload this into your bookkeeping software. The latter import of the takings report is not compulsory when on an invoiced basis but is suggested (by HMRC) as this would reduce any inputting error.
If you record VAT on a cash basis, there is potentially a more significant change to the way that you will be required to enter your receipts into your accounting records. Under the MTD regulations you are no longer able to record the receipts as and when they are shown on your bank statements as being received. You must now enter each individual receipt of a customer invoice as it is logged as received on your Vet System. Similar to the invoice method, you will need to export a copy of your itemised takings report as a csv file and use this to post your receipts by uploading the csv report into your accounting software. This will have implications in respect of the month end where receipts are included on the takings report, but haven’t yet actually been received through the bank, e.g. the credit card takings processed on 31 March and logged on the Vet System as at this date, may not be seen on the bank statements until, say, 2 April. Therefore a reconciliation to identify your cash in transit/outstanding lodgements should be carried out at the end of each month.
Should you require assistance on how to import the reports into your accounting software you should consult your software provider.
It is important that you check that you are able to run the above csv files as mentioned now, in advance of the soft landing period ending. If your Vet System is not capable of such measures (which most should be by this point) you will need to apply for an extension with HMRC as soon as possible. It is therefore very important that you investigate this matter now. Your customer support team at your Vet System provider will be able to assist you with how to export your reports to csv files and should also be able to advise if the system is currently not able to do so.
No Vet System
It may be that you do not use a Vet System but use your accounting software to record customer debtors, e.g. you raise a customer invoice to the individual customer in Sage or Xero as and when the invoices are sent to your clients. If this is the case, provided you have the necessary digital links in place and meet all other digital record keeping requirements, this methodology complies with MTD and is fine to continue.
Monthly drug supplier statements
Each month you will receive a monthly statement from your main drugs supplier, which itemises the monthly invoices/credit notes obtained throughout the month. Under MTD, there is a relaxation around supplier statements in para 4.3.3.1 of Notice 700/22. This sets out that, where a supplier issues a statement for a period, you may record the totals from the supplier statement (rather than the individual invoices/credit notes), provided all supplies on the statement are to be included on the same VAT return and the total VAT charged is shown.
Whilst this approach seems at odds with how sales are recorded, this has been discussed with HMRC and they have confirmed the above.