Group VAT and Making Tax Digital in Business Central: A UK Guide

If your UK business group is VAT-registered as a single entity with HMRC, you're already managing the complexities of disregarded inter-company supplies and a consolidated return. Adding Making Tax Digital to that picture creates a very specific technical challenge — especially when each group member runs as a separate company in Business Central. Here's what you need to know.

What Group VAT registration actually means

A VAT group registration allows multiple legal entities to be treated as a single taxable person for VAT purposes. HMRC issues one VAT registration number for the whole group. One representative member — the lead entity — files a single VAT return covering all members' supplies to third parties. Supplies between group members are outside the scope of VAT: they're disregarded. The lead entity carries joint and several liability for the group's VAT debt.

This structure is useful when group companies trade heavily with each other. Without it, every inter-company transaction generates VAT cash flows to track and reconcile. The group registration consolidates them away — which simplifies cashflow but adds a compliance requirement: you now file for everyone.

What Making Tax Digital means for VAT groups

HMRC's MTD for VAT requirements apply to VAT groups in the same way they apply to any VAT-registered business: the return must be submitted digitally using MTD-compatible software, with a digital link maintained between your accounting records and the submission. A manual keying-in from a spreadsheet to the submission software breaks the digital link requirement.

For groups filing a single return, the digital link applies to the consolidated figures. Every figure on the nine-box return that goes to HMRC must be traceable back through digital links to the source transactions — across all group members. HMRC's guidance is explicit that re-keying figures between systems does not constitute a digital link.

The challenge for Business Central groups

Standard Business Central handles VAT at the company level. Each BC company generates its own VAT entries, calculates its own nine-box return, and has its own MTD submission capability built in. That works perfectly for a single-company VAT registration.

For a VAT group, you need something different:

• Box figures consolidated across multiple BC companies — and potentially other systems — into a single set of nine boxes.
• A digital link maintained throughout: no manual retyping between companies or into a spreadsheet.
• A single MTD submission to HMRC against the group VAT number, representing all members.

Out of the box, BC does not provide a way to consolidate and submit a group VAT return. The built-in MTD submission is per-company only.

How UK groups are handling this

Groups managing multi-company VAT in Business Central tend to take one of three approaches.

The spreadsheet approach (common, but risky)

Pull VAT figures from each company manually, sum them in a spreadsheet, then re-enter the totals into the lead entity's BC return or submission tool. This works operationally, but breaks MTD's digital link requirement. Manual re-keying between records is not a digital link — HMRC's guidance is clear on this. Groups doing this are technically non-compliant and exposed to penalties if HMRC reviews the submission chain.

A custom AL extension

Some partners build a bespoke extension that pulls VAT ledger entries from each group company via the BC OData or Business Central API and aggregates them into a single group return for submission. This maintains the digital link and can be made robust, but it is expensive to build, requires maintenance on every BC platform update, and puts the long-term compliance burden on the partner relationship.

A dedicated group VAT MTD tool

Third-party AppSource extensions purpose-built for UK group VAT MTD consolidation maintain the digital link, handle multi-company aggregation, and submit directly via the HMRC MTD API — without requiring custom development or a spreadsheet step. For most groups, this is the lowest ongoing compliance risk and the most auditable paper trail.

What to check before your next return

A short checklist for group finance teams on Business Central:

• Are all group members' VAT entries captured in a digital system — not just the lead entity?
• Is the consolidation step fully digital, with no manual retyping anywhere in the process?
• Is the MTD submission made against the group VAT registration number, not an individual company's number?
• Does the submission include all current group members — including any that joined or left the group during the period?
• If members use different systems, is the inter-system link digital (API or documented file transfer) rather than manual copy-paste?

Frequently asked questions

Can a VAT group submit separate MTD returns per entity?

No. A VAT group has one VAT registration number, and HMRC expects one MTD-compliant return for the group, filed by the representative member. Filing separately per entity would require each entity to hold its own VAT registration — which dissolves the group registration and its benefits.

Does HMRC check the digital link for group returns?

HMRC's compliance activity on MTD is increasing, and the digital link requirement is enforceable. Groups that cannot demonstrate an unbroken digital trail from source transactions to submission face penalties. If your process involves a spreadsheet step, treat that as a compliance risk to close before your next return rather than something to address if asked.

What if some group members are on different accounting software?

The digital link requirement applies to every step in the chain, including cross-system steps. If a member company is on Sage and the lead entity is on Business Central, you need a documented, auditable digital link between them — an API connection or an export-import with a clear audit trail. Copy-pasting figures from Sage's VAT report into BC's return is not compliant.

Can we use a Business Central consolidation company for group VAT?

A BC consolidation company can form part of the solution. If VAT entries are transferred to the consolidation company via BC's automated consolidation process (which is documented and auditable), that step maintains the digital link for BC-to-BC transfers. You still need to ensure the MTD submission is made against the group VAT number and covers every member — including any on systems outside BC.

Getting the compliance right

Group VAT MTD is not especially complex once the process is correctly set up — but getting there matters, because an incorrect digital link creates retrospective compliance exposure across every return filed that way. If you're unsure whether your current group VAT process meets MTD requirements, or you're setting up a group registration for the first time on Business Central, talk to our team. We work with UK multi-entity Business Central clients and can tell you quickly where you stand.