VAT, Out Of Scope transactions

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Posted on by WithamAccountant

How do you "mark" or "categories" transactions as Out of Scope of the VAT process please?

We have transactions which get reported which we should not show on our VAT return (the Net element) - could go through the Sales Ledger, Purchase Ledger or General Ledger. Ideally I would like to mark them as "Out Of Scope" i.e. the user has made a positive decision to mark as "Out Of Scope" rather than just not completing the VAT Group/Item VAT Group.

The only suggestion we have for D365 is to set up another Item VAT Group/VAT Group however the transaction still then appears on the VAT return. It also complicates things for users (the scenario we have we would require more than one VAT Group per customer i.e. could not rely on the default).

Any help would be appreciated.

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Ludwig Reinhard Microsoft Employee on at

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Hi WithamAccountant,

I don't know for which country/region you need that but one option would be not setting up tax reporting codes in the tax code form.

Another option is to apply filter on the report/form that shows your tax transactions.

Yet, without having more details we can only provide some basic standard configuration & filter options.

Hope this helps.

Best regards,

Ludwig

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WithamAccountant 10 on at

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Thank you Ludwig for taking the time to consider and reply.

We are registered for VAT in the UK and Ireland. However there are transactions that go through our Sales Ledger that should not be reported to either tax authority, as they are "Out of Scope" (for example an Intercompany transaction with another legal entity that is part of the same VAT group [not to be confused with a D365 VAT Group]).

When processing Sales Invoices we populate VAT Group (for customer)/Item VAT Group (for product), hence required on the input form (is this what you mean by the tax code form)?

An example of a transaction we may process through this same form is a Sales Invoice to a subsidiary (inter-company). To identify these transactions and to ensure no VAT is calculated on the transaction we have created a VAT Group for this scenario but the transaction is still included in the VAT Return.

We are ideally looking for an item we can populate into the VAT code fields to indicate that it is to be excluded from the VAT return which we can then also analyse on (we have more than one scenario when transactions get excluded which we ideally like to validate is to correct and also do subsequent analysis on the amounts (for the purpose of Partial Exemption).

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Incognito007 27 on at

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Hi WithamAccountant Just wondering if you had managed to resolve this issue? As we are having similar scenarios having just implemented D365 Finance and Operations and looking to go live with MTD very soon. Many thanks

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