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Which of your clients are exempt from Making Tax Digital?
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Which of your clients are exempt from Making Tax Digital?

Though there might be some serious efficiencies to be gained from the introduction of the Making Tax Digital scheme (between £1.7 and £1.8 billion each year as per the government’s Digital Efficiency Report), HMRC has acknowledged that some of your individual and business clients will be exempt as they cannot transact online.

As per the Government Digital Inclusion Strategy published in December 2014, there are 3.5 to 4 million people that “may never have basic digital capabilities”. The main reasons for exclusion include:

  • Access - ability to actually go online and connect to the internet
  • Skills - to be able to use the internet
  • Motivation - knowing the reasons why using the internet is a good thing
  • Trust - the risk of crime, or not knowing where to start to go online

The above challenges that some of your clients might face can be seen in detail in the graphic below

While some of these challenges are still being considered for small businesses, HMRC has decided that if your clients fall in any of the following groups they will be excluded:

Businesses and organisations

HMRC has stated that there will be exemptions for some businesses and organisations including:

  • All self-employed individuals, unincorporated businesses, and landlords with gross income/annual turnover below £10,000 (HMRC is still considering whether this should be higher)
     
  • Those in employment who have secondary income below £10,000 per year through self-employment or property.
     
  • Charities except trading subsidiaries of charities
     
  • Community Amateur Sports Clubs
     
  • Possibly insolvent businesses and insolvency practitioners

Individuals - those who may never go online

It isn’t just businesses that don’t use the internet. HMRC recognises that a minority of people can’t use digital tools.

While only 5% of the adult population do not have basic literacy skills (2.6 million people), these groups, referred to as ‘digitally excluded’ are defined as those who can’t engage with accounting software for reasons such as:

  • religion
  • disability
  • age
  • remoteness of location

In a consultation from earlier this year “Making Tax Digital: Bringing business tax into the digital age”, HMRC suggested it will consider other exemptions on a case-to-case basis. 

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