Charities will be exempt from new digital filing rules 

01 Feb 2017 News

The government has said it will exempt charities from new requirements to file digital tax returns every quarter, but trading subsidiaries will have to follow the new rules. 

HM Revenue & Customs conducted the Making Tax Digital consultation last year, which included proposals to require all organisations to maintain digital tax records. The Charity Tax Group and other charity tax experts lobbied for the charity sector to be exempt from new rules. 

In a summary of responses to the consultation the government confirmed that it would exempt charities, but said trading subsidiaries would have to comply with new rules. 

There were 91 responses to the question of whether charities should be included and the government said in its response that most supported the idea of an exemption.

It received 142 responses to the question about trading subsidiaries and said that responses were “more polarised”. 

The government said the reason for not exempting trading subsidiaries is that: “While the proposal to exempt those trading companies who distribute all profits to charity (and therefore had no corporation tax liability) had some merit, they could still have substantive VAT obligations.

“A significant reason for exempting charities is that many of them do not currently have to submit a tax return, and have a number of reliefs available to them for VAT purposes.”

In a statement today CTG said it was a “welcome and pragmatic” decision to exempt charities but that it would continue to lobby for trading subsidiaries to be added to the exemption. 

But added that if trading subsidiaries have to be included “we believe it would be sensible to introduce some form of transitional period and consider a size threshold to protect smaller organisations”

It said it also hoped the government would “consider options to integrate Gift Aid operations for both charities and donors (including higher rate relief through Personal Tax Accounts) as systems develop as part of the Making Tax Digital agenda”.


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