Dealing with small value purchases and retail sales

You’ve read that you will need to digitally record all sales and purchase invoices when Making Tax Digital (MTD) is introduced. Is there a way around this problem in the case of minor expense items or cash sales made by your retail business?

Purchase invoices

Your business will need to record all purchase invoices in a digital format if you are captured by Making Tax Digital (MTD) after April 2019. Don’t forget that MTD is compulsory for any business that trades over the £85,000 registration threshold. It is not acceptable to make one posting based on a supplier statement or a batch of invoices. You will need to record the net amount of the invoice and the amount of input tax being claimed. The posting date will be the invoice date unless you use the cash accounting scheme, when the payment date will be relevant.

Tip. The starting date for MTD is the first VAT period beginning on or after 1 April 2019. So, for example, if you complete VAT returns for months ending February, May, August and November, your start date will be 1 June 2019.

Expense claims – concession?

Employees in your business might submit expense claims for their road fuel, stationery purchases and other minor expenses, where they attach a bundle of receipts to support their claim. These receipts will often be for small amounts and many will include VAT. Do the rules mean you need to individually post every receipt attached to the claim, e.g. a book of stamps bought from the post office or food costing £5 from a bakery?

The good news is that the VAT regulations confirm that you don’t need to digitally post an invoice or receipt if to do so would be “impossible, impractical or unduly onerous.”HMRC has not given specific details about this concession but small expense items would almost certainly qualify. The key word is “or”; so you only need to fulfil one of the three conditions.

All sales recorded digitally?

Myth. It is a myth that you will need to digitally record every sale you make if you are a retailer or a business that makes cash sales.

Example. A coffee shop is VAT registered and keeps a two-buttoned till, standard-rated sales are coded to button 1, and zero-rated sales are recorded against button 2. The owners are concerned that they will need to get a new till after April 2019 so that each individual sale is recorded digitally.

Tip. Retailers will be required to digitally record their daily gross takings figures but there is no requirement to digitally record individual transactions, such as the sale of a pot of tea and piece of cake that our coffee shop sells to a customer.

It has always been a legal requirement for retailers to record daily totals, and these figures will need to be recorded digitally, so there is no change here. Our coffee shop can continue to use its two-buttoned till under MTD.

Tip. HMRC recently confirmed that some businesses will not need to join MTD until October 2019 if they have certain complications, e.g. they use the annual accounting scheme or make VAT payments on account. You can check if your business is included on HMRC’s MTD information site (see The next step ).

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