Unincorporated businesses, landlords, incorporated businesses and very large partnerships are going to be brought into Making Tax Digital at various stages over the next few years, but there are some exemptions.
 

Charities

Charities are exempt from Making Tax Digital.
 

Community Amateur Sports Clubs

Community Amateur Sports Clubs are exempt from Making Tax Digital.
 

Digitally excluded

The digitally excluded fall into two categories:
  1. A person who is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications.
  2. A person for whom online filing is not reasonably practicable for reasons of disability, age, remoteness of location or any other reason.
At some point in the future there is likely to be an online route, for those who believe they are digitally excluded, to apply to HMRC for a ruling confirming their exemption from Making Tax Digital.
 

Unincorporated businesses and landlords 

Unincorporated businesses and landlords with a total gross income of £10,000 per annum are exempt from Making Tax Digital. 
 
Example 1
David is self-employed as a seasonal ice cream seller. He drives his ice cream van around Penzance during the summer months and his gross turnover is £9,000 per year. After buying his stock and paying for petrol his net profit is £6,000. His income is supplemented by benefits.

David is exempt from Making Tax Digital because his gross annual turnover is £9,000, below the exemption limit of £10,000 per year.

Example 2
Ian is self-employed and runs a sweet shop. His business in Margate relies heavily on tourism and he only opens his shop when it is busy with holidaymakers. His gross turnover is £8,000 per year. After buying his stock and paying his rates and utility bills, his net profit is £5,000.

To supplement his income, Ian also does some painting and decorating for clients when his shop is closed. His gross turnover is £9,000 per year which, after paying for travel and paint, reduces to a net profit of £8,000.

Ian is not exempt from Making Tax Digital. Although his gross turnover for each individual business is less than £10,000, his total gross income is £17,000 which is above the exemption limit.
 

Can we help?

If you have any questions about Making Tax Digital please contact our Head of Technical Research, Guy Smith, on 0345 223 2727 or at g.smith@abbeytax.co.uk.