Good news for charities as HMRC relaxes digital VAT rules

HM Revenue & Customs has relaxed the rules and regulations relating to Making Tax Digital for fundraising events.

Under usual reporting conditions, a charity fundraising event would normally include a number of supplies that would need to be recorded on a VAT return.

However, in an updated VAT notice, HMRC said it recognises that “charities may find it difficult to meet the strict digital record keeping requirements for events run by volunteers”.

Charities and not-for-profit organisations, therefore, can record digitally all supplies made relating to the event as if it were a single invoice, and all supplies received can be treated similarly.

HMRC added that this easement only varies the requirements on maintaining records using functional compatible software, and does not change any other record keeping requirements as per VAT legislation.

The VAT notice explains: “Where supplies are made or received during a charity fundraising event run by volunteers you may treat all supplies made as covered by one invoice for the event, and all supplies received as covered by one invoice for the event, for the purposes of the digital record keeping requirements.”

MTD for VAT was launched on 1 April 2019 for almost all VAT-registered businesses and charities turning over more than the VAT registration threshold (currently £85,000). Under the new scheme, eligible organisations must record and submit digital VAT returns once a quarter using MTD-compatible software.

Commenting on the update, John Hemming, chair of the Charity Tax Group (CTG), said HMRC’s latest changes should make record-keeping for charity fundraising events less onerous for charities.

“Often these events are run by volunteers and with limited internet/computer access, making it impractical to maintain digital links between the individual supplies made,” he said.

“HMRC had not considered these types of situation, but officials have listened and responded in a pragmatic way, allowing special treatment for charities in these circumstances.”

If your charity is not yet up to speed with MTD or you would like to understand how the recent change in MTD reporting might affect your organisation, please contact us

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