Making Tax Digital for VAT

  • By Mark Morton
  • 21/03/2019

HMRC published VAT Notice 700/22 in July 2018 to highlight the rules for Making Tax Digital (MTD) for VAT and about the digital information that businesses must keep if MTD applies to them. 

The MTD rules provide for certain exemptions from the need to keep records electronically and file online. The most recent update of 700/22 has now added some further details on the practicalities of these exemptions.

Broadly the exemptions are that:

  • it’s not reasonably practicable to use digital tools to keep business records or submit VAT returns because of age, disability, remoteness of location or for any other reason;
  • the individual/business are subject to an insolvency procedure; and
  • the 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.

Not practical

HMRC state that this exemption will apply if it’s not practical to keep records digitally because:

  • of location - for example inability to get internet access at home or business premises and it’s not reasonable to get internet access at another location; and
  • of a disability - for example if someone cannot use a computer, tablet or smartphone for the frequency amount of time it takes to keep digital records for the business.

In addition, HMRC state that they will consider how age and circumstances impact the ability to follow the rules for MTD.

If someone claims that they should be exempt because they are unfamiliar with the relevant software  HMRC will take into account how much they use or intend to use a computer, tablet smartphone or the internet for other purposes and whether it’s reasonable for them to learn how to use MTD software.

Religion

HMRC state that if a person considers themselves to be a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications then they will also look at whether they are currently filing online and use a computer or smart device for business or personal use.

Costs

HMRC state that they will not give an exemption purely on the basis that reasonable effort, time and cost may be involved in making the transition to MTD such as choosing and buying any new hardware or software or learning to use them. HMRC will however take effort, time and cost into account in its overall assessment of whether it is practical to follow the rules for MTD.

So, if you have any clients who think that any of these apply it may be worth approaching HMRC.

You can also keep your clients updated on MTD for VAT with our client letter and briefings. Ordering is easy, simply email marketing.support@mercia-group.co.uk or call 0116 258 1242. 

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