Value Added Tax

Making Tax Digital ― who do the rules apply to?

Produced by Tolley
  • 22 Dec 2021 18:49

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Making Tax Digital ― who do the rules apply to?
  • Who is covered by MTD for VAT obligations?
  • Phased introduction of MTD for VAT obligations
  • Exemption from MTD requirements ― turnover below registration threshold
  • Businesses dropping below the VAT registration threshold ― turnover test
  • Exemption from MTD requirements ― other grounds
  • Following the rules voluntarily and opting out
  • Practical points ― who is covered by MTD?

Making Tax Digital ― who do the rules apply to?

This guidance note looks at who the Making Tax Digital (MTD) for VAT rules apply to and who is exempt from MTD requirements.

For an overview of MTD for VAT more broadly, see the Making Tax Digital ― overview guidance note.

For in-depth commentary on the legislation, see De Voil Indirect Tax Service V5.101B.

Who is covered by MTD for VAT obligations?

At a high level, the MTD for VAT obligations apply to all VAT registered businesses. However, this is subject to:

  1. phased introduction of the MTD obligations for certain categories of business / person

  2. exemption for voluntarily registered businesses on the grounds of taxable turnover (until April 2022)

  3. exemption on the grounds of limited other reasons

SI 1995/2518, regs 32A, 32B

It is also possible for businesses who are not ‘mandated’ to follow the MTD requirements voluntarily.

Phased introduction of MTD for VAT obligations

MTD obligations came into force for most VAT registered business trading over the VAT registration threshold on 1 April 2019.

However, for certain classes of business / person, the introduction of MTD was particularly onerous and HMRC agreed to defer mandation of the requirements for a further six months (ie until 1 October 2019). This ‘deferral group’ included:

  1. trusts

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