This guide aims to help you simplify your VAT reporting with membermeister. This method involves segmenting your income by VAT exempt and non-exempt classes, potentially helping you stay below the UK VAT threshold (£85,000 as of January 2024).

Membermeister cannot offer official tax advice. Please consult your accountant to determine if this approach applies to your specific business and whether claiming exemptions is suitable for your circumstances.
For a specialist in this area we recommend contacting Sam Smith of Smith & Co.

Background
Certain businesses, particularly in the arts and education sectors, can potentially apply for exemptions on specific classes deemed as educational and when taught by the owner of the business themselves. This could help reduce your taxable income.

The Challenge

VAT reporting is usually done on a 'cash basis', meaning payments, not invoices, are analysed. Membermeister invoices often combine exempt and non-exempt classes, making it difficult to separate payments accurately for reporting, especially for partial payments. HMRC might even deem the entire payment VAT-applicable in such cases.

The Solution: Invoice Splitting for VAT Optimisation

This method involves splitting your invoices based on VAT exemptions. Using this method you'll complete two sets of invoice runs, one for VAT-applicable invoices and one for VAT-exempt invoices.

When it comes to providing information to your accountant, you'll run a membermeister payments report. This report displays the associated invoice and reference for each payment, and you'll be able to use the filters within your spreadsheet programme to easily identify and calculate income from exempt and non-exempt invoices.

Trade-off
​This approach generates two separate sets of invoices - one for exempt and one for non-exempt classes. While this simplifies VAT reporting, it means your customers (parents) could potentially receive two invoices instead of one. However, we can offset this inconvenience for customers using automatic collections via GoCardless.

A written guide can be found below.

3. Type "Exempt" in the text box in the Add a new tag field, and click 'Save. For the next class you need to tag, you can select the Exempt tag from the Choose an existing tag dropdown menu.

4. Once all VAT-exempt classes have been tagged, you can move on to invoicing.

Go to the Invoices tab and select Invoice all classes

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3. When invoicing, de-select any classes not tagged as exempt. To do this uncheck the tick box to the left of the class name, where the class isn't tagged as Exempt on the right.

Scroll down to the Invoice details section at the bottom of the and input your invoice details as normal. In the Reference field, put in "E" (for exempt), after your invoice reference. This will show up on invoicing reports and will allow you and your accountant to filter for these invoices in a spreadsheet package.

Click Prepare invoices to generate invoices for the VAT-exempt classes.

Once the draft invoices have been generated, repeat the process, but this time select classes NOT tagged as exempt.

This time use the code NE (Non-Exempt) in the Reference field under Invoice details.

Go to the Reports tab and select Invoices & Payments.

Select payments from the dropdown menu. Specify the date range from the dropdown menu to the right and click the blue Run report button.
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Once the report has been generated, click the Download full report button in the top-right of the screen. This will create a CSV file with the report contents.

Open the file in your spreadsheet programme, and apply a filter to to the Reference column to identify either the exempt or non-exempt payments. An example of such a filter is shown below.
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By following these steps, you can leverage membermeister's invoice splitting functionality to optimize your VAT reporting and potentially reduce your taxable income. Remember to consult your accountant for personalised guidance.

​Key Steps

Benefits

Trade-off

Please let us know if you have any questions.