Opinion Former Article

Concern at short window to claim exemption from Making Tax Digital

The Low Incomes Tax Reform Group (LITRG) is warning VAT registered individuals and businesses they have little time to apply for an exemption from the new digital VAT requirements which begins for some on 1 April 2019. The call comes as HMRC have just issued guidance explaining how people can claim exemption from these new Making Tax Digital for VAT (MTD) requirements.

Head of LITRG Team Victoria Todd said:

“We are very disappointed that HMRC have 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.”

MTD for VAT only applies to businesses 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. Under MTD for VAT, VAT registered businesses with a taxable turnover above the VAT threshold 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. 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 MTD for VAT altogether if exemption is granted.

Victoria Todd said:

“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 recordkeeping 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.”

Anyone who already has an exemption for VAT online filing will be given automatically an exemption from the new requirements without needing to claim.

Notes for editors

1. The HMRC guidance can be found here. It was published by HMRC today (28/2/2019).

2. Write to HMRC, VAT Written Enquiries Team, Portcullis House, 21 India Street, Glasgow, G2 4PZ

3. Compliance with the new Making Tax Digital for VAT requirements becomes mandatory for businesses with turnover above the VAT threshold with effect from their first VAT return period which begins on or after 1 April 2019. Therefore the new rules will apply from 1 April 2019 for those who have a quarterly VAT return period ending on 31 March 2019, and on 1 May 2019 for those who have a quarterly VAT return period ending on 30 April 2019 and on 1 June 2019 for those who have a quarterly VAT return period ending on 31 May 2019.

4. 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)

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