These topics are interlinked. If a business can’t operate MTD-compliant software, it may have a case for claiming an exemption from MTD, on the basis that it is not reasonably practicable for the business owner to use digital tools.
To comply with MTD the taxpayer needs to keep their VAT records in a digital format, which goes beyond the current requirement to submit the VAT return to HMRC using the online VAT portal. That act of submitting the VAT return can be completed by us as the tax agent on behalf of our client, but keeping digital records is a continuous obligation.
We can take on this responsibility of keeping our client’s records in a digital format, but our engagement letter should clearly set out who has responsibility for the accuracy and security of those records.
HMRC has now issued guidance on how it will view claims for an exemption from MTD, contained in VAT Notice 700/22 at section 3. Although the title bar of this notice says it was last update on 18 January 2019, that is a fib. Notice 700/22 was significantly changed last week to include the exemptions guidance.
HMRC concede that if a taxpayer needs help from a third party to meet their MTD obligations, and that help falls away, the taxpayer should ask HMRC for an exemption.
Applications for exemption should be made either by phone to the VAT helpline: 0300 200 3700 or in writing to:
HM Revenue and Customs
VAT Written Enquiries Team
21 India Street
HMRC does not test the MTD-compliant software for how it copes with various VAT schemes. It only tests the software to determine whether the VAT return figures are submitted correctly to HMRC, and those software packages are then “recognised” not “approved”.
Many HMRC MTD-recognised software packages can’t handle VAT schemes such as; partial exemption, retail schemes, margin schemes, or even accounts made up to 5th April. We will be aware of this when advising our clients as to what MTD-compliant software you should use.