HMRC has released a new version of VAT Notice 700/22 which corrects the errors included in the original version.
VAT notice
The original version of VAT notice 700/22 implied that if the taxable turnover had ever exceeded the VAT registration threshold, the business was required to enter the MTD regime from April 2019. The new VAT notice makes it clear the MTD rules only apply from 1 April 2019, and the turnover of the business for periods before the 12 months leading to April 2019 is irrelevant.
However, once a business is mandated into MTD because of its turnover, it can’t leave the MTD for VAT regime just because its turnover has dropped below the current VAT registration threshold. A business will be able to exit the MTD regime if it deregisters for VAT (and meets the turnover test to do that), or if it qualifies for an exemption on different grounds.
The other grounds for MTD exemption are broadly:
- all the business owners have religious objections,
- the business is subject to insolvency procedures, or
- it is not reasonably practical for the business owners to use digital tools to keep business records or submit returns.
HMRC has promised to issue more guidance on the “reasonably practical” exemption by 31 January.
Written by the Tax Advice Network