VAT registered individuals and businesses needing to apply for an exemption from the new digital VAT requirements- Making Tax Digital (MTD) – have little time to do so, according to the Low Incomes Tax Reform Group (LITRG)

MTD for VAT applies to businesses with taxable turnover exceeding £85,000 but as the threshold is based on turnover and not profit, LITRG argues some small businesses with very low profits still find themselves having to deal with VAT on a day to day basis and will be required to keep records digitally and use software to submit their VAT returns with effect from their first VAT period beginning on or after 1 April 2019.

Broadly HMRC says business could be exempt if:

• it’s not reasonably practicable for you to use digital tools to keep your business records or submit your VAT Returns because of age, disability, remoteness of location or for any other reason
• you or your business are subject to an insolvency procedure
• your business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records
• You do not need to sign up for Making Tax Digital or apply for an exemption if either:
• you’re already exempt from filing VAT Returns online
• your taxable turnover is below the VAT registration threshold.

Victoria Todd, head of LITRG team said: “We are very disappointed that HMRC has only just been able to provide detailed information for the public as to how exemption from MTD for VAT may be obtained. Those with VAT quarters beginning on 1 April 2019 will have little over a month to decide whether they have grounds for exemption and make an appropriate claim. It is unlikely that someone who is denied an exemption will now have sufficient time to either challenge the decision or get themselves ready to go digital by 1 April 2019.

“We urge people to act without delay to claim an exemption if it is needed. People must show it is not reasonably practicable for them to comply with the MTD requirements of either digital record keeping and/or filing returns digitally to get an exemption. They must call the HMRC VAT helpline (0300 200 3700) or write to HMRC’s VAT Written Enquiries Team and explain their situation. They must tell HMRC why it is difficult or impossible for them to comply with the new requirements. HMRC will consider the claim and will then write to taxpayers to tell them whether the claim is successful or not. If a claim is turned down taxpayers can appeal against the decision and details of how to do this will be included in the letter from HMRC.

“If someone is ultimately unsuccessful in claiming exemption, they must make every effort to comply with the MTD rules. HMRC should be able to offer assistance via their Needs Enhanced Support service.”

The guidance HMRC has just issued is here.

For further reading: Businesses should start engaging with HMRC digitally for VAT