Charities can now receive additional time to comply with the requirements of Making Tax Digital (MTD), after HMRC opened an application process last week.
Extra time will be available to businesses and charities with complex or legacy IT systems that could need a longer time period for implementing digital links in their MTD software to meet VAT requirements.
Extensions will be in addition to the one year soft-landing period already provided by HMRC, which sets deadlines at 1 April 2020, or 1 October 2020 for deferred charities.
Charities that need more time to have digital links in place, in addition to the soft-landing, should apply to HMRC and explain why that date is unachievable and not reasonable.
Applications are required by the end of the soft-landing period, and criteria and details for the process are in VAT Notice 700/22, section 188.8.131.52.
Criteria for extension
The criteria in the VAT notice says as an example that a charity will be eligible for an extension where it can explain why commercially available software does not meet its digital link requirements.
Problems around cost at a charity would not be a sufficient reason for HMRC to provide extra time.
HMRC also requires details of the systems that cannot be digitally linked, and an explanation and timetable for when and how the charity will become fully MTD compliant, which it says would ordinarily be no later than a year after the soft-landing.
It also requires details on the controls used by the charity that will ensure any manually transferred data is moved accurately.
A statement from Charity Tax Group (CTG), which contributed to HMRC’s assessment on the requirements, said: “While most charities should hopefully be able to meet the digital link requirements with sufficient preparation, this extension does provide welcome reassurance that there is a safety net where changes are unachievable.
“It is important that charities start to look ahead and continue to share any concerns about MTD with groups like CTG so that these can be conveyed to HMRC.”