Small Traders Get Extra Time To Register

October 18, 20220

Businesses with a taxable turnover of less than £85,000 per annum can continue to use their VAT online account for a limited period to file VAT returns due on 7 November.

HMRC confirms that low turnover traders can continue to use their VAT online account for a limited period to file their VAT returns which are due on 7 November.

HMRC has been ramping up communications to tax agents and businesses, to remind them that the old VAT portal will be closed with effect from Tuesday 1 November 2022.

This closure is designed to force businesses to sign up to MTD and submit their VAT returns using MTD-compatible software. It has been a legal requirement for all VAT-registered traders to submit their VAT returns this way for periods beginning on and after 1 April 2022. Newly registered traders have to comply with all the MTD regulations from the start of their first VAT period.

Small Relief

In August an HMRC spokesperson told us: “It would be wrong to leave a filing channel open that is not lawful for customers to use, as they could then become liable to a penalty if they used the incorrect channel. HMRC has written to every affected customer warning them of the change.”

However, on 13 October the HMRC help and support team contacted tax agents with a bulk email that contains a limited concession for certain VAT-registered traders who have yet to complete the sign-up process for MTD VAT. It says: “If your client’s turnover is under the VAT threshold of £85,000 and they haven’t signed up to MTD in time to file their next return by 7‌‌‌‌‌ ‌‌‌November 2022, they can still use their existing VAT online account for that return only.”

The Institute of Chartered Accountants in England and Wales (ICAEW) Tax Faculty welcomed this concession, as it will give those smaller businesses, who have only been subject to the MTD VAT regime since April 2022, between one and three months to register for MTD.

Complete The Process

Some businesses may believe that they are MTD compliant as they are filing their VAT return using software, but they have not actually completed the MTD sign-up process.

Research into businesses’ awareness of MTD VAT, carried out for HMRC between June 2021 and January 2022, found that around 36% of traders thought they had already signed up for MTD, but they had not actually completed the sign-up process. All the businesses in the research sample were selected by HMRC as having not yet signed up to MTD VAT.

Apply For Exemption

Businesses that are already exempt from filing their VAT returns online will have that exemption automatically carried over for the MTD VAT regime. But there may be many more small businesses that will want to apply for an exemption from MTD.

There is no online route to apply for an exemption from MTD (obviously!), so the trader, or their tax agent, has to either call HMRC on the general VAT helpline: 0300 200 3700 or write to: BT VAT, HM Revenue and Customs, BX9 1WR.

A standard letter may be quicker for a tax adviser to issue than waiting for HMRC to answer the phone, but there is a risk that the exemption request gets lost or the client is left waiting for an answer for many weeks.

HMRC advises that taxpayers who apply for an exemption from MTD VAT will get a letter containing the HMRC decision, and until that letter arrives they should continue to file VAT returns in the usual way (in other words by the old portal). This could be impossible if HMRC has closed the portal for all VAT traders. AccountingWEB member, Kevin Ringer reports that HMRC is taking months to respond to applications he has submitted for MTD exemptions.

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