Charities - MTD and VAT update
As reported in our Winter 2017 newsletter, Making Tax Digital (MTD) for VAT will be mandatory for VAT registered businesses trading in excess of the VAT registration threshold (currently £85,000) from April next year.
HMRC have confirmed that there is no opt out for charities and they will need to maintain their records digitally and submit their VAT returns via API to HMRC. This can either be by using compatible software or API enabled spreadsheets.
There was concern at the recent Charity Tax Group conference that charities could be unable to comply as their software was not yet compatible. Whilst HMRC have indicated that there will be a “soft landing” for the first year and that they will not penalise charities for non-compliance, this only applies to the digital link between packages or interfaces. The required records must be stored digitally and the VAT return must be submitted via API enabled software from April 2019. As a result if the software being used by the charities is not compatible, consideration may need to be given to whether an additional piece of software is required to facilitate compliance. HMRC have confirmed multiple systems can be used to comply with the MTD requirements but that there must be a digital link between these systems and it is this digital link that the soft landing applies to.
We understand that there is concern about how partial exemption and/or business and non business use apportionments should be managed under MTD. However these do not form part of the MTD journey and these calculations can be undertaken manually.
Please contact Alison Birch if you would like further information about this.