Margin scheme VAT and MTD - The Book-keepers Forum (UK)

Cheshire · Master Book-keeper

Margin scheme VAT and MTD

Cheshire · Master Book-keeper

disbelief

Leger · Master Book-keeper

Hi Joanne

Maybe post this to aweb?

Only suggestion I can make is to amend the last invoice to show the total VAT due, but that may not be practical for you.

"Alternatively, you can record the sale at one rate and correct the VAT through an adjustment at the end of the period, using the same method HMRC will allow you to use to correct the VAT on a mixed supply"

Cheshire · Master Book-keeper

Hi John
I posted two VAt queries on Aweb over the last couple of weeks. Both ignored.

Must be something I said!

But thank you for your alternative suggestion, although that the VAT adjustment wont work. Well it will from an accounting point of view - dr sales and cr vat output account. BUT and a big but, the journal DEBIT goes to box 7 (purchases) in the VAt return and does not reduce box 6.

Always done it the way you suggest for one client as a bulk VAT adjustment, BUT who gave a flip flopping damn what it said in boxes 6 & 7. But now we have to get it right. Daft thing is - with a spreadsheet and written accounting methods it couldbe, not software though.

I know not of another way.

Cheshire · Master Book-keeper

Ive just posted another Q. A short version of the one Im preparing for HMRC, later on here (perhaps) and my MP plus Mel Stride (pointless though it may be, but I might just stick it to them before I sell up!)

Leger · Master Book-keeper

Cheshire wrote:
But thank you for your alternative suggestion, although that the VAT adjustment wont work. Well it will from an accounting point of view - dr sales and cr vat output account. BUT and a big but, the journal DEBIT goes to box 7 (purchases) in the VAt return and does not reduce box 6.

I've just tried it in VT. 9 invoices for £1000 no vat then the last invoice £1000 sale £1000 VAT. Purchases £4000 no vat. As long as you have a manual record of the calculation I think that covers both MTD and accounting sides. Only drawback is that particular invoice recorded wrong on sage, which is why I said it may not be practical to you.

Cheshire · Master Book-keeper

Youve lost me. Sorry my migraine is still lurking and its probs just me or maybe just the 9 invoices comment.

So just to check - in your TB you will have £10000 in debtors, £9000 in sales, £4000 in purchases and £1000 in VAT due?

I was going to try it in VT but just had to switch off to it, besides how can I possibly move it all to VT (clients would be an absolute NIGHTMARE to move, given they are all on it, although........perhaps if I can nail it down so ALL they can do is the invoicing on it??)

Can I be cheeky, given you have gone to the trouble of giving it a go in there - can you send me the backup of it so I can have a nosey in mine?

I will defo owe you a couple of beers.

Although we also still have the Accountants to get past as well. Plus the lack of stocking facility. Oh and lack of foreign currency options. Oh bugger, shut my brain up!!!!!

I think if I stick with sage I need a definitive from HMRC given they told someone who reported on Aweb not to report the purchases at all and said all he needed in box 6 was the margin value (apparently!)

THANKS LOADS.

Still offski though!

Leger · Master Book-keeper

Hi Joanne, copy sent.

Sorry, ignore the 9 invoices comment, I hadn't meant to confuse you.

Essentially on the last sales invoice of the quarter, enter the VAT due to HMRC and this will record the debtors, sales and VAT correctly.

I can't see why the same can't be replicated in Sage. I would have tried it but haven't used Sage for years.

<giggle> Well if that's the way HMRC have suggested to do, that's obviously the right way!! </giggle>

Cheshire · Master Book-keeper

Hi John
Copy receveid.....that made it much easier to understand.

Cracked it - you super star!!!!!! As I said in my email back to you - I owe you a few beers!!!!!

Sage -double line sale £x zero rated, then a £0 standard rated, overkey £0 VAT with VAT margin. Soooooo simple when you know how, or concentrate harder/spend quality time looking at your software, or have a John star on hand.

Just the Part exchanges to sort. Later sage versions have that one sorted easily, older not so. But hey if HMRC are gonna moan then they can sod right orf.

VAt recs will be even more interesting than they are now as concentrating whilst keying will be interesting, double lines for each one, rather than total VAT adj at end of each quarter (thousands of lines!)

Thanks bud!!!!!!!!!!

Leger · Master Book-keeper

Hi Joanne

Glad I was able to help. You've helped oodles of peeps on here, sometimes without even a thank you, so a bit a karma back at you doesn't go amiss. When I started fiddling I tried doing it with a journal, but as you found out in sage it mucks up the purchase box on the VAT return. Then I re-read the 700/22 and I thought, what if I just knock the total VAT off the final invoice, and bingo it worked.

If you do it per invoice isn't that going to double your keying in time? Be a right pain if it does.

Cheshire · Master Book-keeper

Leger wrote:

If you do it per invoice isn't that going to double your keying in time? Be a right pain if it does.

Oh yes, but the way Ive (scan) read it, you have to do per line entry now for MTD so....so be it. Except I havent got the time to do what one of them needs now (the other is ok!) and whilst they pay me with no quibbles they are not going to like the extra fees - he went as pale as a ghost when I told him my fees which went from a relatively small fixed fee to c 5 x when I took over actually looking after their stockbook. Mind you I think they must appreciate it - they pay within minutes of sending my invoice every month so not one I would necessarily want to lose.

Just need to try to resolve how to get information in a more timely/efficient/less query prone manner.

Cheshire · Master Book-keeper

Leger wrote:
Hi Joanne
so a bit a karma back at you doesn't go amiss.

Ah John, thanks. I defo need that this week as the list of traumas is getting longer by the bloody minute to the point of me sitting here almost blubbing in the middle of the day.

Leger · Master Book-keeper

Cheshire wrote:
Leger wrote:
If you do it per invoice isn't that going to double your keying in time? Be a right pain if it does.
Oh yes, but the way Ive (scan) read it, you have to do per line entry now for MTD so....so be it.

There's also an option in 700/22 to overwrite the VAT so I don't see why this can't be done at the end on the last invoice(s). It shouldn't affect MTD as the transaction is done before it becomes a digital link. I'm not saying I'm right, that is just my interpretation.

Cheshire · Master Book-keeper

There is, other than for deposits, only one invoice per transaction.

In part the whole process got me confused because I usually have the sales invoices way before the purchase invoices it's to do with printed invoice book numbers and having to wait whilst 50 items are bought before I see them. Sales books get filled up much quicker because a lot of stuff is also bought in via part ex. So I'm often 2 sales books ahead of the one buyin book. Hence why it's currently zero rated for all sales, manually adjust the vat at the end. But the latter will not work because of the journal debit issue reporting wrongly.

I've jumped in already and told them that I need purchase invoice books to contain lower numbers so I can get the info earlier. They've agreed once the existing stock has been exhausted. Need a meeting to discuss how best to get the info earlier etc as well.

I could over key the vat on one invoice, only poss an issue when the deposits run to 20+ transactions, but in truth its probably quicker to key 2 lines into sage, as I can have several lines dones whilst Im working out the vat margin one one, unless I can add the extra calcs to easily extract the information from the stockbook for one sales book at a time to save thinking about the keying as Im inputting into sage (I'm already once into SB and once into sage)and deliberately did not add extra columns for deposits given you never know how many can be included and being mindful to ensure the vat Rec is easy, it's a bloody painful process now half the time. ( Pondered today for all of 5 minutes until I started getting stupid calls on other subjects). Will overhaul the whole process perhaps during May once this vat is done. Part of the issue is that it works now, after tons of tweaking and its working bloody well so I dont want to change it too much if I can!)

-- Edited by Cheshire on Tuesday 9th of April 2019 11:34:29 PM

Leger · Master Book-keeper

This is a question, possibly Vince or Ian might know

Could you have a macro of some description (whether on Sage or the CSV) where you enter the total VAT at the end of the quarter, which then amends the vat return that goes through to the API (I assume you will be filing with bridging software?)

That to me would be acceptable for MTD although considering HMRC accepts manual adjustments I'd be sorely tempted to amend the CSV manually anyway!

Cheshire · Master Book-keeper

Use of macros is where I usually bow out......my excel skills are pretty poor, although my VAT reco on the SB Im quite proud of (even though someone else might think its pretty dismal).

I might have to pay around with it when I have some free time (hahahahaha, whats that!)?

Thanks John

allisont · Member

Hi cheshire. Hoping you can help me with this and mtd. I have done 2 qtrs and sure I make a mountain of a molehill work wise although now with mtd I may have to. Can you take me through step by step how you record yours under margin scheme on vt please. Previously I have done a lot on excel and just posted the total summary figures to vt. many thanks. Allison

johnhemming · Senior Member

I have a few antique dealers and second hand car traders using the margin scheme who bridge from Excel. The principles are the same as bridging for any other vat scheme. I have also checked with HMRC and as long as digital records are kept if people are in a rush during the soft landing period they will accept some manual reposting. Personally I prefer to get things right with all the digital links, but as this is a process of change for some people it is easier to use this short cut.

allisont · Member

Hi john. My client is a second hand car dealer. Currently I replicate the stock book purchases on excel. Copy and paste the qtrs purchases to another spreadsheet and post the total purchase cost in vt stock ledger zero vat I have another spreadsheet for sold cars showing the cost sale price and vat margin I then journal the total cost of the cars sold from stock to purchases Bring in the total sale price with the vat figure as per the margin Always wonder if I am doing this correct and if now under mtd (apart from the stock book) do I need to individually post all these purchases & sales to vt or if some can still be summarised. Hope you can follow me. Appreciate your help. Allison

Cheshire · Master Book-keeper

You cannot bulk key/summarise the VAT under MTD according to the last time I read the rules.

If you key purchase invoice and sales invoice as is (zero rated) and then adjust by journal MOST software will show the journal in the wrong VAT box.

Also if you process CNs for part exchanges (either linking to those sales or indeed those purchases above) in then most software reports the values in the wrong place on the VAT return (the VAT is right, the sales and purchases for your Accounts are right, just the VAT boxes are completely out!) There is NO software that gets the margin scheme correct for VAT.

You could key the purchase and sales just to cash book, but then what for the part exchanges. There is no way in most software to link the part ex process to either a sales/purchase cash book item. if you do find one in some software it still drops the sales/purchases to the wrong boxes in the VAt return. (the VAT due is correct, its just the totals sales and purchases that are out!)

Hope Im making sense.

Sorry Allison I havent got time for this just now as Im mid VAT and on a deadline Im likely to miss at this rate (clients!). If it can wait until after the 7th, I have a plan to ask people on different accounting software to try different scenarios out for the margin scheme. Im happy to try Sage and VT. if you can try VT and QBO. If maybe John (Leger) can try Pandle and Freeagent (?) and anyone else out there - I will issue some processing instructions in different formats to test.

Im also thinking of lobbying the prof bodies for some help! Whole thing is a farce, just to get a couple of boxes right for HMRC. It will not increase the tax take, in fact it will decrease the CT take as Accountants bills will be bigger!!!!!!!!! Semi rant over (for now)

johnhemming · Senior Member

Cheshire wrote:
You cannot bulk key/summarise the VAT under MTD according to the last time I read the rules.

This is the soft landing issue. During the soft landing period you can retype things as long as you have the underlying digital records. My advice, however, is to do things in a way that is 2020 compliant which means full digital links. However, HMRC have confirmed that as long as the digital records are there rekeying is allowed until March 31st 2020. However, that has only been done once in the hundreds of submissions that I have handled - because someone was up against the deadline. The next time they will do it the right way and anyway this was before it was mandatory.

Cheshire · Master Book-keeper

johnhemming wrote:
Cheshire wrote:
You cannot bulk key/summarise the VAT under MTD according to the last time I read the rules.

This is the soft landing issue. During the soft landing period you can retype things as long as you have the underlying digital records. My advice, however, is to do things in a way that is 2020 compliant which means full digital links. However, HMRC have confirmed that as long as the digital records are there rekeying is allowed until March 31st 2020. However, that has only been done once in the hundreds of submissions that I have handled - because someone was up against the deadline. The next time they will do it the right way and anyway this was before it was mandatory.

Absolutely agree John. I did not want to avail myself of the soft landing position because 2020 will soon be here! But for one of mine this is the final VAT quarter of the year, so its going to be the old way and manual adjustments on a needs must basis.

I would be interested to know how to get round the software issues as not everyone can afford to purchase new software and besides the new software from most of the big providers still hasnt been sufficiently adapted to cope with the margin scheme in bulk.

I do have a suggested workaround for QBO but havent tested it yet. Not that mine will move to QBO, not least because they have sunk thousands in existing software, but because my fees would be horrendous as processing in QBO is so slow in complex situations. We cannot be the only ones struggling with the margin scheme. Or are we overthinking it?!

Shaun - do you fancy a 'project' - we cannot pay you (!), except in cake!

johnhemming · Senior Member

allisont wrote:
Hi john. My client is a second hand car dealer. Currently I replicate the stock book purchases on excel. Copy and paste the qtrs purchases to another spreadsheet and post the total purchase cost in vt stock ledger zero vat I have another spreadsheet for sold cars showing the cost sale price and vat margin I then journal the total cost of the cars sold from stock to purchases Bring in the total sale price with the vat figure as per the margin Always wonder if I am doing this correct and if now under mtd (apart from the stock book) do I need to individually post all these purchases & sales to vt or if some can still be summarised. Hope you can follow me. Appreciate your help. Allison

I don't know that much about VT. What is clear is that from 1st April 2020 you will not be allowed to summarise the entries.

VAT is quite a complicated tax and I personally think many software companies go about it the wrong way. My personal view is that you need to start with a list of transactions and work out the tax attributes of each transaction and then generate the tax reporting from that. If you are also doing double entry accounting then you can also generate that from the transactions. However, if you generate double entry accounting getting the right figures in the right place from the double entry accounting is quite difficult because it is a two step process and some of the key information is probably lost by the first process. If we take EC or Domestic Reverse Charge, for example, there is actually no payment for VAT, but it needs to be reported combined with transactions where there is an payment for vat.

Margin is a good example of a scheme where the way in which the software tries to calculate the vat makes it either easier or harder to get the reporting right. Doing tax analysis from the transactions means you can get the margin vat reporting completely right without having to do any adjustments.

johnhemming · Senior Member

Cheshire wrote:
I would be interested to know how to get round the software issues as not everyone can afford to purchase new software and besides the new software from most of the big providers still hasnt been sufficiently adapted to cope with the margin scheme in bulk.

I don't think we disagree. It is important to try to get things right, but sometimes a quick fix is required.

It might be worth having a phone conversation about margin vat. The stockbook is not legally part of the digital records and although there needs to be an audit trail on the margin calculation and the calculation of the vat on the margin, it is not something that should be overly complicated and would not fall as part of the digital records. It could, therefore, be on paper, but I would personally not keep it on paper. Only the vat and the net figure are part of the digital records.

I have done antiques and second hand cars, but I have not yet done global margin. It probably needs a little experimentation, I think I know the answer, however, but would wish to experiment with it.

Cheshire · Master Book-keeper

Some split entries discussed on here get round the issue for the margin scheme, I use that for one client (part sales price = purchase price at one tax code, balance at another tax code ie the margin) but still doesnt get round software dumping stuff in the wrong 'pockets' for VAT reporting when there are part exchanges and journalling.

prime example - journal from sales nominal the vat margin amount to the VAt control - sage is correct for accounts purposes, but drops it into box 7 (purchases).

Cheshire · Master Book-keeper

johnhemming wrote:
Cheshire wrote:
I would be interested to know how to get round the software issues as not everyone can afford to purchase new software and besides the new software from most of the big providers still hasnt been sufficiently adapted to cope with the margin scheme in bulk.

I don't think we disagree. It is important to try to get things right, but sometimes a quick fix is required.
It might be worth having a phone conversation about margin vat. The stockbook is not legally part of the digital records and although there needs to be an audit trail on the margin calculation and the calculation of the vat on the margin, it is not something that should be overly complicated and would not fall as part of the digital records. It could, therefore, be on paper, but I would personally not keep it on paper. Only the vat and the net figure are part of the digital records.
I have done antiques and second hand cars, but I have not yet done global margin. It probably needs a little experimentation, I think I know the answer, however, but would wish to experiment with it.

No we dont disagree biggrin

all my clients stockbooks are on excel/open office.

Its just about manipulating the software.

Happy to chat again - some time next week after my current traumas if thats ok and maybe when Ive had a few bods on here try different software, plus when Ive perhaps had a chat with a helpful Aweb lady who uses QBO for global scheme who was trying the workaround.

Cheshire · Master Book-keeper

allisont wrote:
Hi cheshire. Hoping you can help me with this and mtd. I have done 2 qtrs and sure I make a mountain of a molehill work wise although now with mtd I may have to. Can you take me through step by step how you record yours under margin scheme on vt please. Previously I have done a lot on excel and just posted the total summary figures to vt. many thanks. Allison

So NLR now I take it given your other post.

Leger · Master Book-keeper

Hi Joanne NOT TO BE READ UNTIL 8TH JULY biggrin biggrin biggrin

More than happy to try out your scenarios on Pandle.

Did my "solution" not have any mileage? (sorry for pun)

From further upthread.

Essentially on the last sales invoice of the quarter, enter the VAT due to HMRC and this will record the debtors, sales and VAT correctly.

I can't see why the same can't be replicated in Sage. I would have tried it but haven't used Sage for years

In my example. The margin adjusted VAT is entered as the VAT and as far as I can see that's allowed. In theory I guess it could be done on each individual sale. eg Car sold £1000 Purchase Price 600 Profit £400.

So the software entry is Sales £920 VAT £80 Purchases £600 no VAT. However I do remember you saying you had oodles of sales so it may not be practical to do it individually

Another thought is to do it as you've previously done in the software. Dump the VAT boxes to excel, Enter the adjustments into an excel sheet that updates the VAT boxes which can then be sent to HMRC. John H, is that allowed?