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Making Tax Digital for VAT – exemptions and deferrals

Making Tax Digital for VAT (MTD for VAT) is set to come into effect from 1 April 2019 for businesses whose turnover is greater than the current VAT registration threshold of £85,000. However, there are deferrals and exemptions to this as listed below.

Firms that fall into the categories below are exempt from MTD for VAT:

  • Businesses run by practicing members of a religious society or order with beliefs incompatible with the regulation’s requirements
  • Businesses subject to an insolvency procedure
  • Those satisfying HMRC that, for reasons of age, disability, remoteness of location or for any other reason, it is not reasonably practicable for them to use digital tools to keep business records in order to submit returns.

Furthermore, HMRC’s MTD for VAT guidance was updated in October 2018, outlining a significant deferral of the initiative for a small group of taxpayers with ‘more complex’ requirements. They will be given an additional six months to prepare for MTD for VAT, and will therefore not be mandated to use the system until 1 October 2019.

The deferral applies to: not-for-profit organisations that are not set up as a company; trusts; VAT divisions; VAT groups; local authorities; public corporations; and traders based overseas. Public sector entities required to provide additional information on their VAT return, those who must make payments on account, and annual accounting scheme users are also covered by the deferral.