Making Tax Digital – Exempt Businesses

20
Feb

Making Tax Digital for VAT is almost upon us. From April 2019, VAT-registered businesses above the £85K threshold will have to keep digital records and submit VAT returns online using compatible software.

If you’re already exempt from online VAT submissions, HMRC have said: “exemptions from MTD for VAT are the same as those that are already in place for online filing for VAT”.  It’s worth double-checking your exemption status (or re-checking if it’s been a while) to make sure you don’t get caught out.

There are some products and services that are exempt from VAT, and if these are your company’s main trades your entire business will be exempt from VAT. This includes charging VAT on sales but also reclaiming VAT on any goods, purchases, or expenses.

HMRC have a comprehensive overview here. A full list is also available.

If you’d like to apply for VAT exemption, use the VAT1 registration form available from the GOV.UK website.

Outside of the above, you may meet one of the additional exemption criteria. According to HMRC, “The exemptions that already apply to electronic VAT returns will be extended to cover digital record keeping requirements.”

These exemptions include a business:

  • who the commissioners are satisfied is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications
  • to whom an insolvency procedure as described in any of paragraphs (a) to (f) of section 81(4B) of the Act is applied
  • for whom the commissioners are satisfied that it’s not reasonably practicable to make a return using an electronic return system (including any electronic return system that that person is authorised to use) for reasons of disability, age, remoteness of location or any other reason is not required to make a return required by regulation 25 using an electronic return system

You will have a right of appeal against HMRC should your exemption be refused.

Additionally, from HMRC,, the regulations will provide that a taxable person is exempt from the MTD requirements for any month (‘the current month’) if:

  • the value of the person’s taxable supplies, in the period of one year ending with the month before the current month, was less than the VAT threshold, and
  • the person was not subject to those requirements in the month before the current month

You should also be aware that:

“A taxable person with turnover below the threshold (or a business which is insolvent) may elect for the relevant exemption not to apply. A business making such an election must do so before the first day of any return period that they wish for the exception to the exemption to apply. This is to be made by notice to HMRC and specify the date it will run from.”

“A business may withdraw an election at any point by notice to HMRC. They must include the date they are withdrawing the exception from. This can’t be a date in the past. The obligations will cease from the start of the next VAT return period after that date. If, at any point following the election being notified to HMRC they are no longer exempt they may no longer withdraw the election.”

Source: Making Tax Digital for VAT: legislation overview

If you think your business should be exempt, you should contact HMRC (or your accountant) to find out more.

To get in touch with HMRC please use the VAT Helpline: – 0300 200 3700.




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