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Draft MTD response: Exemptions
This is the fifth of six blogs in which I present my personal views on the questions in the consultation document MTD: Bringing business tax into the digital age
This instalment contains to key questions about which businesses should be exempt from MTD. My view is that all businesses with turnover under the VAT threshold (currently £83,000) should be exempt.
I also argue that the quarterly reports should be combined with the reporting for the quarterly VAT return (see my blog on quarterly updates). To achieve that coordination between VAT data and other accounting data the MTD quarterly reporting start date should be delayed until at least 2019.
Do you agree? Please post your views below. I will be making a formal response to HMRC on behalf of the AccountingWeb community, and want to incorporate as many of your views as possible.
Q 29: What criteria should be applied in determining whether to exempt a particular business or business type from the requirements of MTD?
If the VAT turnover threshold is used for MTD, then the VAT registration rules can be used for MTD. Those rules already exist so no new law is required, and the rules are well understood by tax advisers. Businesses are very aware of the VAT threshold.
Q 30: Should charities be exempt from the requirements to maintain digital records and to update HMRC at least quarterly?
Charities should be exempt.
Q 31: Should trading subsidiaries of charities be exempt from the requirement to maintain digital records and to update HMRC at least quarterly?
Subsidiaries of charities should be exempt from MTD.
Q 32: Should CASCs be exempt from the requirement to maintain digital records and to update HMRC at least quarterly?
CASCs should be exempt from these MTD requirements.
Q 33: Should businesses within the insolvency process be included within the scope of the requirement to maintain digital records and to update HMRC at least quarterly; and are any special arrangements required for this group?
These businesses should be exempt from the MTD requirements.
Q 34: Which businesses should be included within a consistent definition of persons ‘unable to engage digitally’?
MTD should not be rolled out until there is fast broadband coverage across the whole of the UK.
Q 35: Do you agree that £10,000 annual income is an appropriate threshold for exempting businesses from Making Tax Digital? Do you have any other comments on how the exemption should operate?
Turnover of £10,000 is not an appropriate level of exemption. All businesses with turnover under the VAT registration threshold should be exempt from MTD quarterly updates and digital record keeping.
Reporting to HMRC after the year end may be a digital requirement, but that needs to be introduced very gradually, over a period of five years, as was the case with reporting PAYE online.
Q 36: Should the smallest unincorporated businesses that are not exempt have an extra year to prepare for Making Tax Digital? How should eligibility for this group be defined?
See answer to Q 28. No compulsory MTD updates or returns until 2019/20 at the earliest. Testing of the procedures for a full accounting period must be performed first.
Q 37: Do you agree that the principles set out in Fig. 7.3 are the right ones to use in determining eligibility for an exemption? Are there any additional principles which should apply?
Tie the thresholds for MTD reporting to VAT registration/ deregistration turnover thresholds.
Q 38: Which additional groups (if any) should be exempt from the requirements to maintain digital records and to update HMRC at least quarterly?
Any business with a turnover under the VAT registration threshold should be exempt from keeping digital records and quarterly updates.
If you have similar or different views on these questions please make a response directly to HMRC at: [email protected] or by completing the HMRC survey which covers the main questions from this consultation document.
You don’t have to answer all the MTD questions. A response to just one or two key issues is worthwhile. The consultation period ends at 11.45pm Monday 7th November. Every response counts.