HMRC criticised for lack of MTD exemption guidance

With close to 100 days before Making Tax Digital (MTD) for VAT becomes compulsory, HMRC has come under fire for its failure to publish detailed guidance on when and how to claim exemptions from the new rules, with the Low Incomes Tax Reform Group (LITRG) warning this risks unfairly increasing the burdens on some individuals

Under MTD for VAT, VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to keep records digitally and use software to submit their VAT returns from 1 April 2019. However, certain groups of people, for example those who are ‘digitally excluded’ due to disability, age, remoteness of location or any other reason, may be excused altogether from the new rules.

Victoria Todd, head of team at LITRG, said: ‘We are very concerned that HMRC have not yet published any detailed information as to how exemption from MTD for VAT may be obtained, with the start date so close.

‘HMRC have said that people should contact the VAT helpline to speak to an adviser if they think they should be exempt.

‘We would like to see more specific guidance which explains what information and evidence HMRC will require from a caller, and what they can do if their application is turned down.’

LITRG has welcomed confirmation from HMRC that those already exempt from the current VAT online filing rules will continue to be exempt under MTD for VAT and do not need to re-apply for their exemption.

However, the campaign group points out that there could be significantly more applications for exemption from MTD for VAT when compared to those exempt from the current VAT online filing rules due to the additional requirements under the new system.

Todd said: ‘The current requirement to complete nine boxes on a VAT return is very different to maintaining digital records and using the type of software that will be needed to meet the MTD requirements.

‘That means that people who currently manage to file online may struggle to comply with these additional requirements and therefore may meet the “digital exclusion” exemption conditions.

‘Even if they do not qualify for an exemption, they may require additional support from HMRC to manage the digital aspects.’

LITRG is urging anyone who wants to apply for an exemption to contact the VAT helpline sooner rather than later.

‘It is completely unacceptable that if someone is denied an exemption when they were expecting to get it, they will now have very little time to either challenge the decision or get themselves ready to go digital by 1 April 2019,’ Todd said.

An HMRC spokesperson said: ‘The exemption rules under MTD mirror the existing VAT online filing exemptions. There is no need to reapply for an exemption for MTD. If a business cannot go digital, it will not be required to do so.’

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