Making Tax Digital for VAT has been round since April 2019.

Any particular person or enterprise registered for VAT should preserve key VAT accounting data digitally and use software program to submit their VAT Returns.

Successfully, this has meant most companies use software program for his or her accounting.

This brings enormous advantages inside itself, reminiscent of much better insights into enterprise funds in comparison with making an attempt to maintain accounting data manually.

MTD for VAT applies to VAT teams too, and brings the identical guidelines and necessities.

On this article we check out this, plus a number of deadlines which have come and handed referring to VAT teams and MTD.

For extra details about all points of Making Tax Digital, please go to Sage’s MTD Hub.

Right here’s what we cowl:

Group VAT MTD registration

So, what’s a VAT group?

Generally it’s financially smart for 2 or extra firms (generally known as ‘our bodies company’), or two or extra partnerships, companies or people, to make use of only one VAT registration.

This is named a VAT group registration.

In sensible phrases, it means one member of the group acts because the consultant member for VAT functions. This member is accountable for VAT Returns, plus paying and reclaiming VAT, for all of the members of the group.

The second key profit is that members of the VAT group needn’t account for VAT when making provides to one another.

Making Tax Digital for VAT applies to group VAT registrations, similar to it applies to any particular person VAT-registered enterprise.

However issues are way more complicated with VAT teams in comparison with a standalone VAT enterprise, as a result of there’s usually much more knowledge to be gathered for every return.

This would possibly exist in a number of areas.

In line with the foundations of MTD for VAT, the varied accounting methods throughout the group must be digitally linked.

It needs to be potential for all of the accounting methods or different software program (reminiscent of point-of-sale methods) utilized by every enterprise to ship or in any other case make accessible their knowledge in a single digital location.

That knowledge is then used to arrange the VAT Return.

It’s due to points reminiscent of this that HMRC allowed a number of delays for bigger organisations reminiscent of VAT teams following the beginning of Making Tax Digital for VAT in April 2019.

Making Tax Digital for VAT software program

Uncover how Sage Accounting may help you get your MTD for VAT submission proper, calculate your invoice and submit your VAT Return with ease.

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Deadlines for MTD for VAT teams

Though now handed, there have been two key deadlines for Making Tax Digital for VAT in relation to VAT teams.

October 2019

This was the deadline by which VAT teams wanted to start out observing the foundations of MTD for VAT.

In different phrases, it utilized for the primary full VAT accounting interval after October 2019.

This meant that, if the VAT group filed quarterly VAT Returns, and their first MTD for VAT interval began in October 2019, the primary MTD for VAT Return would have wanted to have been submitted in early February 2020.

Bigger organisations reminiscent of VAT teams obtained this extension following the April 2019 introduction date due to the everyday complexity of their methods, and sure points arising in getting all the things prepared in time.

October 2020

When Making Tax Digital for VAT began, HMRC allowed what was generally known as the mushy touchdown interval.

Companies might ignore a key a part of the digital linking requirement—particularly, that manually copying or reducing and pasting knowledge between two areas was prohibited.

As talked about, in relation to VAT group registrations, making a VAT Return can contain collating info from numerous sources. Subsequently, having the ability to minimize/copy and paste may be very helpful.

Nonetheless, as of October 2020, the complete digital linking guidelines got here into drive.

This meant minimize/copy and paste was in opposition to the regulation when it got here to key VAT accounting knowledge and getting ready the VAT Return. Any companies caught doing so may very well be penalised by HMRC.

For these submitting group VAT returns, this got here as one thing of a blow—however HMRC had allowed a full yr following the introduction of MTD for VAT for the group VAT member to arrange.

What are digital hyperlinks?

The foundations of Making Tax Digital say the related accounting knowledge have to be saved digitally.

Moreover, software program have to be used to ship returns or different kinds of updates to HMRC, as required throughout the MTD guidelines.

Subsequently, if you happen to use multiple piece of software program or multiple system, they have to be all be digitally linked.

It have to be potential to mechanically switch the info from one digital location to a different.

You may need to click on a button to start out off this automated switch, however the important thing factor is that you just’re not doing it manually—maybe by copying and pasting the info, and even scribbling it right into a pocket book after which rekeying it into one other system.

That stated, what’s thought-about digital linking can typically be stunning and a little bit counterintuitive. Emailing a spreadsheet is ok, for instance. You may even move knowledge to anyone by way of USB reminiscence stick.

The foundations for digital linking for Making Tax Digital for VAT might be discovered within the VAT Notice 700/22.

It’s not but clear if Making Tax Digital for Earnings Tax (also called Making Tax Digital for Earnings Tax Self Evaluation) or Making Tax Digital for Company Tax will use the identical digital linking guidelines.

FAQs on MTD for VAT teams

Right here’s the reply to some incessantly requested questions round Making Tax Digital for VAT, in addition to VAT teams.

What’s a VAT group?

Fairly than create particular person VAT Returns throughout a number of firms or organisations you would possibly management, you may mix them right into a single digital entity known as a VAT group.

This implies you solely have to submit one VAT Return, which can report all of the group member’s VAT provides and acquisitions.

VAT teams eradicate the necessity for VAT accounting between firms within the group.

In different phrases, if Firm A makes a provide to Firm B, then there might be no have to account for this as a VAT provide.

Nonetheless, there are some exceptions to this, together with some bought-in providers, and the fee part for some provides. That is detailed in Part 7 of VAT Discover 700/2.

There are additionally sure limitations on what entities can type VAT teams. These are listed in Part 2.2 of the above VAT Discover.

Who can type a VAT group?

A VAT group can comprise numerous parts:

  • Our bodies company, which is to say, integrated companies (restricted firms, public restricted firms, and so forth).
  • Eligible non-corporate our bodies, which is to say, people, partnerships and Scottish partnerships. The inclusion of non-corporate our bodies has solely been potential following a change of the regulation in 2018.

There are different guidelines, reminiscent of the very fact the our bodies company or non-corporate should have a hard and fast institution within the UK, and be beneath frequent management.  

What’s a VAT group registration?

A VAT group registration is the place one particular person or enterprise registers for VAT on behalf or two or extra our bodies company, or two or extra people, partnerships or Scottish partnerships.

This implies the particular person or enterprise is handled as a single taxable particular person or enterprise, but they’re accountable for submitting a single VAT Return on behalf of all members of the group.

To create a VAT group registration, you should full the shape VAT 50/51 with particulars of the VAT group, after which register for VAT within the ordinary method (similar to any particular person or enterprise), offering VAT 50/51 as an attachment.

How do I submit a gaggle VAT Return?

Submitting a gaggle VAT Return is completed similar to it’s for a person or enterprise. That you must use software program to submit the VAT Return, as per the foundations of MTD for VAT.

The software program connects to HMRC’s computer systems throughout the web so you may file the VAT Return.

A spreadsheet can be utilized to compile VAT accounting knowledge for a gaggle VAT return, supplied the digital linking guidelines above should not damaged.

Bridging software can then be used with the spreadsheet to make a VAT Return submission to HMRC.

Nonetheless, most VAT teams use MTD-ready software for his or her VAT accounting, and so are simply capable of create the VAT Return based mostly on knowledge already throughout the system(s).

Last ideas on MTD for VAT teams

VAT teams supply a helpful approach to account for VAT throughout a number of companies.

It could actually cut back complexity and prices.

But it surely additionally brings its personal necessities in relation to legally complying with MTD for VAT’s necessities, and notably the prohibition on copying/reducing and pasting knowledge from one place to a different.

Nonetheless, the advantages of utilizing Making Tax Digital for VAT—and due to this fact utilizing software program for VAT Return submissions—carry such highly effective advantages that it is a small sacrifice.

Editor’s observe: This text was first revealed in February 2022 and has been up to date for relevance.