Have you been contacted by HMRC about Making Tax Digital (MTD) for VAT?


Ewan Bolt

Ewan Bolt

Business Advisory Director and Head of Digital Solutions


HMRC has started to re-target businesses they believe should be MTD compliant based on taxable turnover. If your business has received a letter like this recently, there is action you need to take, even if you are not required to sign up to MTD.

What the letter states

The letter indicates that HMRC believe your business should be MTD compliant based on your taxable turnover being above the VAT threshold of £85,000. However, it also states that if you feel your business falls below the threshold, you need to let HMRC know by completing an online form to explain why as soon as possible.

A reminder about MTD for VAT

The first step of MTD, that came into force in April 2019, is MTD for VAT. This required all businesses with a taxable turnover over the VAT threshold - £85,000 - to sign up to MTD, keep digital records and submit their VAT returns digitally to HMRC using MTD compliant software.

Businesses that don’t need to comply

However, some businesses have turnover greater than £85,000 but this may also include turnover that’s non-taxable under current VAT legislation and exempt from VAT. For these businesses where the taxable element of your turnover is below £85,000, MTD for VAT is still voluntary, but you need to let HMRC know why you don’t need to comply by completing an online form on HMRC’s website. If you’ve received this letter and are unsure if you now need to comply or not, get in touch with your Johnston Carmichael adviser who will work closely with our specialist VAT team to assess your situation.

The steps you need to take

Whether it’s determined that you do need to comply or don’t, you need to respond to this letter from HMRC as they note that failure to respond may incur penalties or surcharges. So, your steps to take should be:

  • Respond to the letter to confirm receipt and that you’re currently reviewing your situation with your accountant and you’ll be back in touch asap.
  • Speak to your Johnston Carmichael adviser. They’ll be able to assess your turnover and activity and advise if you fall under the threshold for MTD for VAT.
  • If you continue to be below the threshold, complete the online form on HMRC’s website to advise the reasons why you don’t need to comply.
  • If you do now need to comply, take steps to become MTD compliant asap. The Digital Solutions Team at Johnston Carmichael will then get to work setting up an MTD compliant solution that suits your needs.

MTD FAQs

HMRC has provided helpful guidance on some of the most commonly asked questions around MTD. Visit our MTD FAQs page here, to access these.

Got a question?

If you have any queries about this letter or the steps that are involved in becoming MTD compliant, please do not hesitate to get in touch. We’re here to help at every step along the way. Contact your usual Johnston Carmichael adviser or feel free to contact me directly at: Ewan.Bolt@jcca.co.uk and we can arrange an initial chat.