VAT Alert: Charities will NOT be excluded from MAKING TAX DIGITAL roll out

09.11.2017

Many accountancy firms have been working extensively with their clients to move them to accounting software systems. This is in preparation for April 2019 when HMRC will expect VAT registered businesses to be able to pass their VAT return data across directly to HMRC in a digital format.

The UK VAT return consists of nine boxes of data and the information for each box will be fed from the accounting systems - not just to indicate the VAT due on Sales made - but also adjustments required from:

  • VAT due on services bought in from abroad;
  • Goods bought in from EU suppliers;
  • Bad Debt VAT adjustments;
  • VAT recoverable on allowable purchases made by the business

to name just a few aspects. The VAT Return represents so much more than simply what I’ve sold and what VAT I’ve paid on my costs.

Additional reporting challenges in terms of those who also have to undertake VAT adjustments on costs they’ve incurred in relation to their:

  • VAT Exempt supplies;
  • any Non-Business or Grant funded activities or
  • adjustments to Capital costs relating to property or building and refurbishment projects

have also to be understood and managed prior to the April 2019 implementation date.

It had been hoped, and indeed understood from the initial discussions with HMRC, that Charities were to be EXCLUDED from the requirements to submit VAT data under this Making Tax Digital initiative. Questions had been asked as to how VAT groups which included a Charity with its trading subsidiary would be treated.

Today we have learnt that this EXCLUSION for a Charity is NOT to apply to VAT reporting in the context of HMRC’s Making Tax Digital roll out.

There has been no official communication from HMRC on this matter we understand, but you can access the Charity Tax Group website for their news release here: HMRC clarifies reporting requirements for charities under Making Tax Digital for VAT

Clearly this will have major ramifications for all Charities with VAT registrations to manage, especially as the sector has effectively been left with less time than others to now prepare for the accounting impact that Making Tax Digital will involve on VAT reporting systems.

Centurion will be running short VAT training events to assist the sector with information on what needs to be accounted for on VAT returns to ensure that clarity is achieved on what accounting data their systems need to produce to ensure a smooth and compliant move to digital VAT reporting.

To register your interest in attending these events please email merle.bethell@centurionvat.com