Making Tax Digital deferred for charitable trusts

Making Tax Digital for VAT (MTDfV) will become mandatory for most VAT-registered landlords and organisations, with a turnover of more than £85,000, from April next year, requiring them to keep records digitally and use HMRC-compliant software to submit their VAT returns.

The regime is currently being piloted with those businesses whose affairs are considered straightforward and up-to-date, but what about those with more complex requirements?

In response to concerns about how ready some businesses are to embrace the impending changes, HMRC have announced a revised implementation schedule for a small minority of VAT-registered entities.

This means that for trusts and other unincorporated, not-for-profit organisations, mandation will be deferred to 1 October 2019. Those affected, including other businesses with ‘complex arrangements’, will be able to sign up for the MTD pilot scheme in the Spring of 2019.

Despite trusts and unincorporated not-for-profit’s being given a six-month reprieve, the mandation date for charitable companies remains unchanged and they are still required to comply with MTDfV by April 2019.

Charity support groups have expressed disappointment that charitable companies will not benefit from the postponement and argue that they are equally as unprepared for the changes that are coming.

John Hemming, chair of the Charity Tax Group, said: “We do not see the logic in not also including charitable companies in this deferral as it is illogical to suggest that their tax arrangements are any less complicated than a charitable trust.”

Toni Hunter, partner and charity expert at George Hay, commented: “I must say it’s surprising that HMRC have conceded a delay so willingly.”

“For the taxpayers in question, those with more complex arrangements, I suspect the six-month deferral will be a welcome advantage. However, it’s worth bearing in mind that the majority of taxpayers remain unaffected by this latest announcement and will still have to comply by April 2019.”

“It’s repeatedly reported that taxpayers as a collective are struggling to prepare for MTD and so I wonder (with optimistic hopefulness) whether this may be the first of a number of push-backs. We will certainly be keeping a close eye on any further developments.”

HMRC had also previously announced a “soft-landing period” for the first year, in respect of compliance with MTD. This means that organisations will only need to fill in nine boxes of information from April 2019 in a spreadsheet, which is then automatically linked to HMRC using application programming interface (API) bridging software. Where possible we are looking for alternative, more long-term solutions to MTD compliance for our clients than add-on bridging software. For the not-for-profit sector however, with complications such as partial exemption VAT registration, and often several branches providing data to one central system, this can be aspirational, so the opportunity to test the veracity of this newly available bridging software during a transitional period is welcome.

From 2020, the data in the nine boxes cannot be entered manually and must be digitally linked from elsewhere, something that is likely to require more complex software.

HMRC have confirmed that the soft-landing period will still expire in April 2020 despite the deferred mandation date for some organisations.

Here at George Hay, we keep up to date with all the latest changes to tax and accounts legislation – including announcements relating to Making Tax Digital.

We understand that organisations operating in the third sector have specific financial objectives, circumstances, priorities and requirements. Our specialist charities team work with clients of all sizes in the not-for-profit sector, providing a range of services including accounts, compliance audits and advice on specific tax, VAT, funding and stakeholder engagement issues.

Make sure you stay up to date with all the latest MTD progress by visiting our Making Tax Digital page regularly. To find out more about how we can help you, contact us today.

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