Being VAT registered and using untied for MTD

If you are VAT registered, untied supports you for your income tax making tax digital filings.

We don't support the VAT returns - these may be filed in another way.

For your self employment, here's what you need to do:

Tag your income and expenses as usual ... using gross sums (ie without making any adjustment on a transaction by transaction basis for VAT)
When you pay VAT to HMRC - tag the money out as an expense
Should you receive a VAT repayment from VAT - tag the money in as income

If this applies to you we may need to set up custom tags for you so get in touch.

Worked example

Steve is an actor.

He earns £120k a year and has an longstanding agent who takes 10% commission. For simplicity Steve is VAT registered on the flat rate scheme and his rate is 16.5%. Steve is on the cash basis for income tax, and cash accounting for VAT, which means he's most concerned about when money comes in and goes out.

In this example, each month Steve earns £10k, and receives £9k from his agent (after the 10% agent fees).

He raises an invoice to his agent with 20% VAT each month.

The agent pays him the VAT separately each quarter, so Steve receives £6k of VAT every three months.

So assuming all the money in and out happens within a quarter, Steve's income is £30k + 20% VAT = £36k. He needs to pay HMRC 16.5% of this - £5,940.

Set up - in untied

In untied Steve sets up a custom tag for "VAT inclusive income". This is not strictly required, but helps with reporting. He maps it to his MTD income source as turnover.

As his income is over £90k he also sets up custom tags for his expenses allowing more detailed breakdowns.

Income tax - in untied

Receiving income

When he receives £9k each month, he:

Uses multiple lines to:
- Record £10k of income - which he tags as VAT inclusive income
- Record an expense of £1k - which he tags as professional fees (though some people may tag it as a different category of allowable expense - it's flexible)

Receiving VAT

When he receives £6k of VAT each quarter from his agent, he:

Tags the income as VAT inclusive income (yes, really)

Paying VAT to HMRC

When he pays £5,940 of VAT to HMRC, he:

Tags the payment as other expenses (again there are different options here of which expense category to use)

VAT - in a bridging product

Steve runs a report each quarter in untied of his VATable income, and then sends this to HMRC via bridging software and applies the flat rate percentage.

Timing differences - money in and money out

The cash basis and cash accounting are both following money in (and money out where applicable), so delays in payment and other timing differences will generally be accommodated by this logic.