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Master Making Tax Digital for VAT Groups

How does Making Tax Digital for VAT Groups work?

Making Tax Digital is part of the government’s plans to make tax returns easier for individuals and businesses.

With Making Tax Digital (MTD), HMRC aims to become one of the most digitally advanced tax administrators in the world.

Since April 2019, VAT-registered businesses above the threshold of £85,000 have been required to submit their VAT returns via a “functional compatible software” and store VAT accounting records digitally.

From 1st April 2022, use of MTD for VAT accounting will be mandatory for all VAT-registered businesses, including those that sit below the VAT threshold.

As a result, it will no longer be possible for businesses to submit their VAT returns manually via the HMRC website; all businesses must submit VAT returns for their first full period from 1st April via a “functional compatible software”.

If your business sits within a VAT Group, you’ll also need to be aware of the deadlines and anything that needs to be done for MTD that is specific to your situation.

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What is a VAT group?

In some cases, it makes more sense financially for two or more companies, or two or more partnerships, businesses, or individuals to use one VAT registration. This is known as VAT group registration.

What it means to be in a VAT Group is that one member of the group acts as the representative member for VAT purposes and is responsible for VAT Returns, as well as paying and reclaiming VAT for all members of the VAT group.

It also means that members of the VAT group do not need to account for VAT when transferring supplies.

How does MTD work for VAT groups?

MTD for VAT applies to VAT groups in the same way as individual companies. However, more than one company in the group means there is significantly more data to manage and submit, and VAT Returns are therefore more complicated.

The data for your group VAT Returns likely exists across multiple systems, meaning each one of them must be digitally linked.

Due to the complicated nature of group VAT Returns, deadlines for MTD were different to those for individual companies.

October 2019 was the deadline for VAT groups to start observing the MTD for VAT rules.

October 2020 was the deadline for full digital linking rules and requirements for VAT groups.

MTD for VAT Groups: FAQs

A VAT Group can comprise of:

  • ‘Bodies corporate’ or incorporated businesses (limited companies, etc)
  • Eligible non-corporate bodies – individuals, partnerships, Scottish partnerships.

The bodies corporate or non-corporate must have a fixed establishment in the UK and be under common control.

One person or business registers for VAT on behalf of two or more bodies (corporate or eligible non-corporate, as in the previous question).

The person or business registered is treated as a single taxable person or business but is responsible for filing a single VAT Return on behalf of all group members.

To create a VAT group, you must complete the VAT 50/51 form with details of the VAT group and then register for VAT in the usual way, providing the VAT 50/51 form as an attachment.

See our ‘How to register for MTD before the deadline’ article for more information on registering for VAT.

Group VAT Returns are done just like those for an individual or business, so in order to comply with MTD rules, the software used must be MTD-compatible. Get more information on this here.

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