Getting an Exemption from Making Tax Digital for VAT

Making Tax Digital for VAT is the default for almost every VAT-registered business, and preference is not a way out of it. Disliking software, or finding it a nuisance, is not a ground for exemption. There is, though, a narrow exemption for the small number of people for whom using computers, software or the internet is genuinely not reasonable or practical, and it is worth knowing exactly where the line sits before assuming either that you qualify or that you cannot. The exemption fits within the wider set of MTD and VAT penalty rules, because until an exemption is granted the ordinary digital obligations, and the penalties for missing them, still apply.

The exemption is sometimes called digital exclusion, and the phrase captures the idea. It is aimed at people who are effectively shut out of the digital route by their circumstances, not at those who would simply rather not use it. That distinction runs through every part of how HMRC applies it.

The grounds for exemption

HMRC will consider an exemption where it is not reasonable or practical for you to use digital tools to keep records and file. The recognised grounds are specific, and each is about a real barrier rather than a preference.

• Age, health or disability that makes it genuinely impractical to use computers, software or the internet.
• The location where you live or work, for example somewhere without a reliable internet connection.
• A genuine objection to using computers on religious grounds.
• Any other reason why it is not reasonable or practical for you to follow the Making Tax Digital rules.

The final ground is deliberately open, but it is not a catch-all for inconvenience. It is there for circumstances of the same seriousness as the named ones, where a genuine and lasting barrier stops you filing digitally. HMRC sets out the grounds and the process in its guidance on how to apply for an exemption from Making Tax Digital for VAT, which is the reference to check your circumstances against before applying.

How to apply

The application is made to HMRC rather than through your software, and it is a matter of explaining your circumstances clearly. You will need your VAT registration number, your business name and address, how you currently file your returns, and the reason you are seeking exemption. If someone is applying on your behalf, for example an agent or a family member, they will need your authority to do so. The stronger applications are specific about the barrier and, where relevant, supported by evidence rather than left as a general statement that the technology is difficult.

It helps to frame the application against the wider obligation it seeks relief from, so being clear on what Making Tax Digital for VAT actually asks of you, the digital records and the software filing, sharpens the case for why it is impractical in your situation. A Making Tax Digital service can also handle the application and, where an exemption is not the answer, set up a compliant filing route that removes the difficulty another way.

What happens while HMRC decides

The most important practical point is that applying does not pause your obligations. You must carry on filing your VAT returns exactly as you do now until HMRC writes to you with its decision. Stopping in anticipation of an exemption that has not been granted simply creates late submissions and the penalties that go with them, which defeats the purpose. If the exemption is granted, HMRC will confirm how you should file instead; if it is refused, you remain in Making Tax Digital and need a compliant route.

For anyone weighing up help with the digital side, the government-backed MoneyHelper service offers free, impartial guidance on managing money and the tools around it, which can be a useful first step for a business owner trying to decide whether support would remove the barrier before applying for an exemption at all.

When exemption is not the right answer

For most businesses that find the digital rules difficult, the practical fix is support rather than exemption, because the grounds are narrow and the application can be refused. Bridging software, a simple cloud package, or delegating the filing to an agent all remove the barrier while keeping you compliant, and any of them is usually quicker to arrange than an exemption is to obtain. The exemption is best reserved for the genuine cases it was designed for, where no reasonable amount of support would make digital filing practical. The digital obligations only bite once you are registered in the first place, so a business still weighing up when it needs to register for VAT has no MTD duty to seek relief from yet.

Common questions about MTD exemption

Can I be exempt just because I find software difficult?

No. Difficulty or unfamiliarity with software is not a ground for exemption on its own. HMRC expects you to take reasonable steps to comply, including getting help, and grants exemption only where using computers, software or the internet is genuinely not reasonable or practical, on grounds such as age, disability, location or religion.

Do I stop filing while my application is considered?

No. You must keep filing your VAT returns as you normally do until HMRC writes to you with its decision. Stopping early creates late submissions and penalties even if the exemption is later granted, so nothing about your filing should change until the decision arrives.

What if my exemption is refused?

You remain within Making Tax Digital and must keep digital records and file through compatible software. In practice the workable answer is usually support rather than a fresh application, so bridging software, a simple cloud package or an agent handling the filing will keep you compliant where an exemption was not available.

MTD exemption is real but narrow, and applying for it does not put your filing obligations on hold. If you think your circumstances around Harrow might genuinely qualify, or you are struggling with the digital rules and are not sure whether exemption or support is the right route, tell us your situation through the form on this page and we will assess whether an application is likely to succeed, make it properly if it is, and set up a compliant filing route if it is not.