The Government initiative ‘Making Tax Digital’ intends that by 2020, the vast majority of businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and to update HMRC at least quarterly via their digital tax accounts.
As part of the consultation on implementing Making Tax Digital (MTD), HMRC is looking at whether charities and Community Amateur Sports Clubs (CASC) should adopt quarterly online filing of tax information, but says it currently has no powers to make this compulsory.
The consultation entitled ‘Bringing business tax into the digital age’ addresses the position of charities and CASCs specifically, and concedes that the vast majority of charities do not incur a direct tax liability on an annual basis, although many do interact with HMRC on a quarterly basis where they are VAT registered. HMRC also says that due to their unique tax status, charities should be exempted from the digital update requirements. Instead, it will be a voluntary process.
However HMRC says it believes there are ‘significant potential benefits’ for charities in maintaining digital records and in using ‘cloud-based’ software to update their digital tax account where they do need to make a return for corporation tax or income tax self-assessment. In fairness, cloud accounting software now does offer considerable benefits and for a few years now we at BWMacfarlane have been working with leading cloud accountancy software providers and helping clients to move from desktop software to cloud platforms such as QuickBooks Online which is relatively inexpensive user friendly and effective.
We offer free demonstrations of QuickBooks Online at our office or over the internet so please get in touch if you would like to know more.
HMRC is also consulting on whether charity trading subsidiaries should be exempted from the requirements of MTD – currently they will be caught and required to file quarterly.
We will be updating our clients about requirements as the results of the MTD consultations and new legislation is passed so do watch this space for further information and feel free to speak to us about the implications.
