On 16 October 2018 HMRC announced that mandatory compliance with MTD for VAT will be postponed for 6 months for VAT registered businesses which have more complex requirements until 1 October 2019. The MTD VAT pilot will be open for these ‘deferred’ businesses in Spring 2019. The 6-month deferral applies to those who fall into one of the following categories:
- ‘Not for profit’ organisations that are not set up as a company,
- VAT divisions
- VAT groups
- Public sector entities that are required to provide additional information on their VAT return (Government departments, NHS Trusts),
- Local authorities,
- Public corporations,
- Overseas based traders
- Traders who are required to make payments on account
- Annual accounting scheme users
If your VAT registered business is trading over the VAT registratoin threshold and you do not fall into one of the deferred categories you must keep records digitally and use software to submit VAT returns from 1 April 2019. Those in the deferred categories should be able to access a pilot scheme in early 2019, but are not eligible for the current MTD pilot process, announced on 16 October 2019.
The date charities are able to join the MTD VAT pilot and are required to comply with the MTD VAT rules depends on their individual circumstances and whether they fall into one of the deferred categories. For example, a charity that is :
- a not for profit organisation that is set up as a company is mandated for MTD VAT from 1 April 2019, unless they fall into one of the deferred categories (e.g. VAT group)
- a trust or a not for profit organisation not set up as a company is mandated for MTD VAT from 1 October 2019.
The Charity Tax Group ( CTG) reports that HMRC is still reviewing whether mandation for CIOs and SCIOs will be deferred or not. Also disappointingly, HMRC have confirmed to CTG that there is no change to the “soft landing” regarding digital links requirements, which covers VAT periods commencing between 1 April 2019 and 31 March 2020. This will mean that charities with deferred status, which do not participate in the pilot process, will have less time to adapt to the new rules.
CTG states that for most charities it should not be too difficult to comply with the first stage of Making Tax Digital (where only an API connection is required to send VAT data to HMRC), for example by using bridging software from spreadheets, but that the requirement to implement digital links could be a lot harder.
The advice we and CTG are giving to all charities is to start preparations for MTD now, read HMRC’s Notice and to talk to your software providers ASAP to find out what products they will be offering.