How to win Making Tax Digital (MTD) exemption

Written by yasiradnan94
15 November 2018

From April 2019, the majority of small businesses must now have fully digital record keeping. This piece discusses the key points of ‘Making Tax Digital’ and how it will affect taxpayers.


With the timetable for Making Tax Digital (MTD) confirmed, the majority of smaller businesses must implement full digital record-keeping from April 2019. For businesses that haven’t begun preparations, it is highly advisable to develop a strategy on ensuring compliance for MTD, including processes for record keeping and VAT filing. Research shows many taxpayers are still not aware of the changes afoot and how it will impact them.

There is, however, provision in the regulations for businesses genuinely unable to comply with the new requirements to apply to HMRC for exemption. The exemption for MTD is modelled very closely on that for online VAT filing, which permits exemption on religious grounds or on the basis of ‘age, disability, remoteness of location or for any other reason’.

Approximately 4,000 online VAT exemptions have been granted by HMRC to date. The number of taxpayers that have no online or digital capacity is far greater than this number. Any business that is currently exempt from online VAT filing will automatically qualify for MTD exemption, if needed.

However, with MTD requiring so much more in the way of digital engagement from the business, some taxpayers will need to delegate the digital record-keeping requirement as well as the online filing. Businesses in this position should establish as quickly as possible whether they are exempt from the MTD record-keeping obligations.

The exemption on religious grounds will not be available for MTD unless the taxpayer already has it for online filing.

We expect HMRC to provide further guidance this month on the MTD exemption process. As it stands exemption can be sought by calling the VAT helpline or making a written request. However, HMRC recommends that applications are not made until further guidance is published.

Download our MTD Guide here


AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.

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