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’ describes MTD as the ‘default’ method for submitting tax details and says all businesses with income tax, national insurance, VAT or corporation tax obligations will be within scope of these requirements unless they have been explicitly exempted.
However, as part of what it terms a ‘common sense approach’, HMRC says all unincorporated businesses and landlords with annual incomes below £10,000 will be entirely exempted from the new obligations, and exemptions will also be available to other groups who can make a case for being out of scope.
The consultation 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 says it believes there are ‘significant potential benefits’ for charities in maintaining digital records and in using software to update their digital tax account where they do need to make a return for corporation tax or income tax self-assessment.
However, 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.
HMRC is also consulting on whether charity trading subsidiaries should be exempted from the requirements of MTD.
The consultation states: ‘We recognise the unique status of charities and their need to maintain a consistent approach in managing their tax affairs across their different operational areas. However, we also recognise the need for a level playing field where charity trading subsidiaries are competing with other non-charity affiliated businesses. We are keen to receive submissions on whether this group should also be exempted.’
The situation with CASCs is similar as like charities, this group has particular reliefs, which mean they do not usually need to file annual returns for their profit-based taxes. HMRC also believes there are significant potential benefits for CASCs in maintaining digital records and providing regular updates where they do need to make a company tax return. However, the consultation suggests their unique tax status means CASCs should also be exempted from the requirements of MTD.
Making Tax Digital: Bringing business tax into the digital age is here.
