HMRC confirms one-year grace period for charities using Making Tax Digital - Thorne Widgery

Tax officials have told the charity sector that it will not be penalised for non-compliance with Making Tax Digital in the 12 months after its launch.

Speaking at the Charity Tax Group’s (CTG) Annual Tax Conference in May, HM Revenue & Customs (HMRC) said charities and not-for-profit organisations will be given a one-year grace period, after which they will be asked to comply fully with digital tax.

Making Tax Digital will be launched in April 2019 for businesses earning above the VAT threshold (currently £85,000). This means companies will be forced to use digital accounting software to file VAT returns on a quarterly basis, or risk fine for non-compliance.

Oliver Fisher, HMRC’s head of strategic design for the MTD scheme, said “There will be a soft landing from April 2019 to April 2020 where penalties in terms of the digital link will be suspended.

“So you’ve got 12 months to prepare up until 2019, and then a further 12 months after that to ensure systems are working. While I would argue that the first 12 months are sufficient, there is an additional 12 months.”

Charities currently preparing for Making Tax Digital should not take this as an opportunity to relax their arrangements, however.

Instead, they should be using the following months to fine-tune their approach to digital tax reporting and aim to stay compliant from day one.

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