There are less than three years left until the government’s ‘Making Tax Digital’ initiative becomes mandatory. Whether you’re new to digital tax or you’ve already kickstarted the switch, it’s best that you start making changes early to avoid any difficulties later on.
If you’re new to the Making Tax Digital initiative, in summary, the scheme was announced in 2015 and states the UK tax system will be 100% digital by 2020. Therefore, all individuals and businesses will need to keep online tax accounts and use HMRC-compliant digital software.
What about Making Tax Digital exemptions?
While the majority of businesses outlined in the Making Tax Digital framework will be expected to digitise their processes, there will be certain exemptions made. HMRC has declared VAT registered businesses and individuals for whom it is not practical to use digital software and will, therefore, be exempt from Making Tax Digital.
Here are a few scenarios in which businesses may be made exempt:
- If it is not practical to use digital software to keep records and file VAT returns due to age, disability, or remoteness of location.
- If the business is undergoing or subject to insolvency procedures.
- If the business is run entirely by practising members of a religious society for whom electronic communications do not align with their set of beliefs.
How do I apply for an exemption?
All you need to do to apply for a Making Tax Digital exemption is call or write to the HMRC’s general enquiries for VAT team. You will need to provide them with the following:
- Your VAT registration number.
- Your business’ name and place of business.
- Your reason for the exemption request.
- Any details about how you currently file VAT returns.
- Any reasons why you would not be able to file VAT returns through digital software or keep digital records.
- Any other reasons why you may not be able to follow Making Tax Digital’s guidelines.
From there, HMRC will handle your request.
Making Tax Digital roadmap
If you’re unsure about what you need to do to prepare, we’re here to help. We’ve created the ‘Making Tax Digital Roadmap’ to show you exactly what you need to do, to make sure you’re fully prepared for the switchover to digital tax.