With just over 100 days to go before it becomes compulsory for most VAT registered businesses to keep digital records and file their VAT returns via software, the Low Incomes Tax Reform Group (LITRG) is very concerned that HMRC are yet to publish detailed guidance to explain when someone might be able to claim exemption from the new rules and how they should do this. This will leave some worrying unnecessarily as to how they are going to cope with the new regime and others with very little time to prepare if their application for an exemption is turned down unexpectedly.
Under Making Tax Digital 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 from Making Tax Digital for VAT altogether.
The Government has said extending Making Tax Digital to other taxes will not happen before 2020 at the earliest.1
Head of Team at LITRG Victoria Todd said:
“We are very concerned that HMRC have not yet published any detailed information as to how exemption from Making Tax Digital 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.”
HMRC have confirmed that those already exempt from the current VAT online filing rules will continue to be exempt under Making Tax Digital for VAT and do not need to re-apply for their exemption which is good news, says LITRG. However, the campaign group remain concerned that there could be significantly more applications for exemption from Making Tax Digital for VAT when compared to those exempt from the current VAT online filing rules due to the additional requirements under the new system.
Victoria 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 Making Tax Digital 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 don’t qualify for an exemption, they may require additional support from HMRC to manage the digital aspects.
“We would urge anyone who wants to apply for an exemption to contact the VAT helpline2 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.”
Notes for editors
1. More information on MTD for VAT can be found here.
2. The VAT helpline is on 0300 200 3700 (textphone 0300 200 3719).
3. The Government Digital Inclusion Strategy policy paper in 2014, found that being able to go online does not mean that people have the basic digital capability to use the internet to do things that benefit them day to day. According to the BBC Media Literacy study, 21 per cent of people cannot use the web.
4. Making Tax Digital for VAT will only apply to business’ with taxable turnover exceeding £85,000 (the current VAT threshold). As the threshold is based on turnover and not profit, some small businesses with very low profits still find themselves having to deal with VAT on a day to day basis.
5. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk
Out of hours contact: George Crozier, 07740 477 374)