Making Tax Digital for VAT Groups

By now, most VAT registered organisations in the UK will be aware that Making Tax Digital (MTD) for VAT came into force on 1 April 2019. MTD is the transformational change to the UK’s tax system and requires organisations to submit their VAT digitally.

Single VAT entities, those on Microsoft Dynamics 365 for Finance and Operations and some versions of Dynamics AX are MTD compliant. However, for VAT groups, organisations will require VAT group MTD compatible software to send their VAT returns to HMRC. Microsoft does not provide a solution for those on Dynamics to submit group VAT.

Incremental has been helping organisations with a range of services to support Microsoft Dynamics users on their MTD journey, since the inception of MTD in April 2019. This article provides an overview of what VAT groups need to know about submitting group VAT returns through MTD.

What is a VAT group?

‘Groups’ refer to VAT groups or different parts of the same organisation where each member of the VAT group or a separate area of an organisation has a single VAT registration. According to HMRC, there are around 20,000 VAT groups in the UK, across a range of different business types and sizes.

What are the deadlines for VAT groups MTD compliance?

VAT group submissions come into force on 1 October 2019, when it is mandatory for groups to use compliant software to submit VAT. Other deadlines are:

October 2019

VAT groups are mandated to join MTD for VAT from 1 October 2019.

April 2020

All other VAT registered businesses and landlords, most organisations that are voluntarily registered for VAT, will be subject to MTD rules.

October 2020

For VAT groups, the links between the software must be digital from 1 October 2020 for the software to be considered functionally compatible for MTD. This is when HMRC’s soft landing period ends and the requirement for a digital connection into underlying records, such as purchase and sales ledgers, comes into force.

HMRC’s soft landing period for digital links

For VAT groups, HMRC has a soft-landing period of 12 months. During this period, some existing processes will be allowed. However, digital links will be mandatory by October 2020. VAT groups still need to report on VAT digitally during this period, but for now, spreadsheets and manual processes can be used to calculate the figures. Organisations will need to look at finding a way to digitally update their processes to remove the possibility of manual error.

Am I compliant for VAT groups?

Organisations that use consolidated group VAT are required to start using group MTD compatible software to send their VAT returns to HMRC. Unlike single VAT submissions, where Microsoft provided recent Dynamics versions with MTD capability, Microsoft does not offer an upgrade for Dynamics users to submit their group VAT. All group VAT organisations will need to source a digital solution.

MTD for VAT Groups Module for Dynamics

Since Microsoft does not offer an upgrade to Dynamics products to comply with group VAT submissions, we have developed an MTD for VAT Groups Module for Dynamics, that connects your Dynamics finance system to the HMRC API and provides an intuitive and compliant mechanism for submitting group VAT. Our module is available for Dynamics AX 2012 R3 and Dynamics 365 for Finance and Operations.

Download our guide ‘Making Tax Digital for VAT Groups and Microsoft Dynamics’ to learn more or visit our Making Tax Digital Hub.