20 March 2019

MTD for VAT….Is the not-for-profit sector ready?

Actions the not-for-profit sector needs to undertake to be ready for HMRC's MTD regulations coming into force

Organisations in the not-for-profit sector are struggling with HMRC's MTD regulation. Here we explain the actions you need to take.

It has been widely reported that organisations in the not-for-profit sector are struggling with HMRC's MTD regulations which come into force from 1st April 2019. Time is running out for organisations to make the changes that are required.

The following points will remind (or inform) you of the actions you need to take:

What is MTD?

Making tax digital (MTD) regulations require affected organisations to record all organisation transactions in a digital format. Paper records will no longer be sufficient or in some cases acceptable.

Organisations need to have specially adapted software to submit VAT return information directly to HMRC from 1 April 2019.  Penalties apply if VAT returns and payments owing to HMRC are not made by the appropriate due dates.

Does it apply to my  organisation?

MTD applies to all organisations that are required to be registered for VAT. This includes organisations with taxable (standard, reduced or zero-rate) turnover of £85,000 or more. If this applies to you, you must be able to submit your VAT returns digitally by 1st April 2019 using MTD compliant software.

Can I get out of it?

There are some exemptions for organisations that are registered for VAT voluntarily or are not able to engage digitally for religious reasons or because of disability, age or location (e.g. no broadband). HMRC has not provided clear guidance or criteria for these exemptions. If you think one of these exemptions could apply to you please get in touch. We are be happy to help you confirm your MTD eligibility with HMRC.

Deadline extension for some organisations

Trusts, unincorporated charities, some public sector bodies and organisations registered for VAT as a VAT group do not need to be MTD compliant until 1st October 2019.  If you think this applies to your organisation contact us and we will confirm your MTD “go-live” date.  Whatever your “go-live” date here’s what you need to do now:

If your VAT records are held on paper.

  • If your organisation records are currently held on paper you will need to move them to digital record-keeping. We strongly recommend that you move to an MTD compliant accounting software package. Software providers such as Xero, Sage and Quickbooks are all promoting MTD compliant versions of their software. We can help you find the one which is best suited for your organisation.
  • If this is a step too far, don't worry!  Software suppliers have developed bridging software that allows you to use Excel spreadsheets to record your VAT transactions and transmit your VAT return information to HMRC in an MTD compliant format.

We are here to support you with this process, just get in touch if you need any help to find a suitable solution.

If you already record your transactions using accounting software.

  • If you already use accounting software to record your VAT transactions you should contact your software supplier to check that the version you use is MTD compliant. HMRC has produced a list of MTD compliant software suppliers and we have replicated that here.
  • If your software is compliant you need to ensure that your existing VAT processes and procedures are correct and work with the new MTD software. We can help you with this by double checking your VAT position is correct and follows current VAT procedures.

You may see this as an opportunity to get rid of a system that is holding you back and move to updated digital software that suits your organisation and provides reliable information, allowing you to make wider organisation decisions.  Contact us if you would like us to suggest suppliers that offer MTD complaint solutions.

Do you currently make manual adjustments on your VAT return?

Many charities and not-for-profit organisations are subject to VAT partial exemption rules. Partial exemption calculations are not regarded as digital records and they can still be performed outwith an MTD compliant software package.  Adjustments still need to be made to the final VAT return before it is submitted to HMRC.

If you would prefer to digitise this process we can help you decide which bridging software to use to perform these tasks.  If you want to discuss this in more detail just contact us.

Finally don't worry! There will be a solution for every organisation but you must consider this now.  Time is running out!