As per the MTD VAT notice, HMRC admits that requiring businesses to record each of the small petty cash transactions separately could be considered unreasonable and an administrative burden to the business. Therefore HMRC will accept that a number of petty cash transactions can be recorded as a single entry into your accounting software subject to a monthly limit. 

The following rule must be applied:

Where a business uses petty cash to pay for small value items, these do not need to be individually recorded with digital records. The business can record the total value and the total input tax allowable. This applies to individual purchases with VAT inclusive i.e. gross, total value below £50 and a total value of petty cash transactions recorded in this way cannot exceed a total gross value of £500 per entry.  

The above logic should be applied if you currently use excel spreadsheets to record and summarise your petty cash receipts, before entering sub totals into your bookkeeping software. 

  • You may therefore need multiple spreadsheets each quarter to overcome the £500 total restriction – one per month, perhaps?
  • Any large individual “petty cash receipts” over £50 gross should be entered separately into your accounting software.

It is important to note here, that where petty cash spreadsheets are set up to monitor this and act as support for any entries inputted within your accounting software that any corresponding petty cash receipts should be being maintained with your VAT records and ideally referenced to your spreadsheet.

Where you currently process your petty cash receipts individually, please continue to do so, unless you would prefer to adopt the above approach.

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Phil Swan
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Mark Harwood
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Suzanne Headington
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