Charities have been warned of a "crash landing" when HM Revenue & Customs introduces its digital tax laws next year.
The government’s Making Tax Digital (MTD) scheme for VAT returns is currently being piloted and will be mandatory for organisations with a turnover of more than £85,000 from April next year.
At the Charity Tax Group (CTG)’s Annual Tax Conference yesterday, charities warned they could be unable to comply with the laws when they come into force because the required software is not yet available.
Speaking at the conference, HMRC's head of strategic design for the MTD system Oliver Fisher encouraged charities to comply early in order to prepare for the mandatory laws coming into force next year.
But many delegates said they were unable to do this as their own filing provider had yet to launch a MTD-compatible software.
Delegates expressed frustration with HMRC that they would not be given a year to comply as is usual procedure.
Fisher argued that charities already had a year to comply as they could file their returns early ahead of the mandatory deadline next year.
He then said there would be a “soft landing” period for the first year from April 2019 where HMRC would not penalise charities for non-compliance with MTD.
“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.”
He added that that some penalties would still apply for non-compliance with the underlying records.
But speaking later at the conference, CTG chair John Hemming said HMRC's "soft landing" could be a "crash landing" if the required software were not up and running before April next year.
One of the biggest concerns for charities in relation to the MTD system is that the sector could collectively have to pay millions of pounds on software to comply.
However, speaking at the conference, charity tax minister Robert Jenrick said PwC had announced a free service for charities and said the Treasury would encourage other providers to follow suit.
He said: “You may have heard last night’s announcement from PwC that they are committed to providing free access to one of its MTD-compatible software products to charities.
“I thought that was very positive news and we would of course encourage anyone else who is developing similar software products to make them available if they can free of charge to charities.
“That will make a difference to many charities to know and have the certainty that there are products available at low or no cost.”
On PwC's website, it says exact details of the software and the offer to charities will be announced "in due course".