Businesses do not have to comply with MTD if:
- it’s not reasonably practicable for them to use digital tools to keep business records or submit VAT Returns because of age, disability, remoteness of location or for any other reason
- the business is subject to an insolvency procedure
- the business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records
These exemptions mirror the current exemptions from online filing for VAT. Existing exemptions from online filing for VAT will be carried over automatically to MTD for VAT and it is not necessary to reapply.
Any business with taxable turnover below the VAT threshold is automatically exempt and does not need to apply to HMRC.
Applications for exemptions can be made by phoning the VAT helpline 0300 200 3700 or in writing to HM Revenue and Customs - VAT Written Enquiries Team, Portcullis House, 21 India Street, Glasgow, G2 4PZ.
HMRC will notify taxpayers in writing of its decision and where the application is refused will include information on the right to appeal.
HMRC has confirmed that while a business is waiting for HMRC to respond to a request for exemption or for an appeal to be heard, it can continue to file VAT returns as it does currently.
HMRC has declined to specify a particular age for exemption; each case will be considered on its merits.
Exemption on the grounds of disability will apply where an individual cannot use a computer, tablet or smartphone with the frequency or for the amount of time it takes to keep digital records for the business.
Exemption on the grounds of location will apply if a taxpayer cannot get internet access at their home or business premises and it is not reasonable to get internet access at another location. It does not apply to those who could obtain internet access but have chosen not to do so. HMRC accepts that it is not appropriate to use public computers (such as in a library) to comply with MTD.
HMRC will not agree an exemption purely on the grounds that time effort and cost is involved in complying with MTD, so long as the time, effort and cost is reasonable. Difficult cases will arise, particularly where an individual has some basic digital skills such as being able to send emails, but would not be able to cope with accounting software or a spreadsheet.
The insolvency exemption covers the following situations:
- when a bankruptcy order or winding-up order or award of sequestration is made or an administrator is appointed in relation to that person;
- when that person is put into administrative receivership;
- when that person, being a corporation, passes a resolution for voluntary winding up;
- when any voluntary arrangement approved in accordance with Part I or VIII of the Insolvency Act 1986, or Part II or Chapter II of Part VIII of the Insolvency (Northern Ireland) Order 1989, comes into force in relation to that person;
- when a deed of arrangement registered in accordance with... Chapter I of Part VIII of that Order of 1989 takes effect in relation to that person; or
- when that person's estate becomes vested in any other person as that person's trustee under a trust deed.
- The current paper-based processes are expected to continue, for both pre and post appointment returns.