Claiming exemption from VAT changes: What you need to know

Changes to the way VAT is submitted, coming next April, will affect nearly all businesses with a turnover of more than £85,000, but HMRC has given details on who is eligible to opt out.

The changes mean all businesses will have to keep digital financial records and file their returns from them, rather than the current system of submitting only the final calculated figure.

But businesses which have already been granted an exemption under the current system from submitting their VAT figures online, and submit them instead by paper or by telephone, will continue to be treated as exempt.

They will not need to notify HMRC to maintain their exemption.

See also: Business Clinic: Inheritance tax implications of letting out farm land

Businesses which claim VAT but have a turnover of less than £85,000 will not have to change over to the new system, but HMRC is encouraging them to do so voluntarily.

An exemption may be granted for businesses which submit tax returns under the current online system, but feel they are unable to change to the new system and use accounting software to submit their returns.

HMRC says this might be for reasons of age, disability, remoteness of location or another reason. If you think this applies to you then you should get in touch with HMRC by phone, with your VAT registration number and postcode to hand.

They can be contacted by calling 0300 200 3700 or by textphone on 0300 200 3719. Opening hours are Monday to Friday between 8am and 6pm.

Reminder: What changes are coming?

From April 2019, all farming businesses will need to keep an electronic record of all business transactions on approved recordkeeping software in order to be able to make VAT returns.

For businesses that do not already use accounting software, this will require investment in software, training to use it and a working internet connection.

There will be no changes to the way VAT is calculated, or to the deadlines for submitting returns online.

Chartered accountant Anne Cianchi, Making Tax Digital project consultant for Farmplan, highlights four key facts businesses need to be aware of:

  1. There will no longer be the option to use a paper-based recordkeeping system to calculate the amount of VAT owed before submitting a paper return or manually entering calculations on the HMRC website.
  2. Farms using electronic spreadsheets, such as Microsoft Excel, will also have to invest in specialist accounting software or bridging software (a tool to transfer data from one place to another) as, after the change, they will be the only products capable of sending and receiving data from the website.
  3. HMRC has made it clear it will not be providing free software for users to make VAT submissions. A list of companies which sell accounting software and are working with HMRC to be compliant with the new system can be found at
  4. Only one submission will be allowed for each individual VAT registration number. This means companies that keep multiple sets of accounts for different businesses – for example, a farm and a diversification enterprise – will need to combine them into one figure for their VAT return. HMRC has made it clear that if the figures are combined from different sources this needs to be done electronically, so bookkeepers should ensure any software they buy is capable of doing this.