HMRC has published a revised statement of impacts for the Making Tax Digital for Business programme.

Full details on the implications of MTD for charities and what it will mean in practice can be found here.

In respect of the implication for charities the technical note states:

The Tax Information and Impact Note published at Spring Budget 2017 indicated that Civil Society organisations may potentially see an increase in requests for help and support from less digitally engaged individuals and business in transitioning to the new requirements. The change in the scope of mandation may lessen that impact. HMRC is, however, continuing to work with Civil Society stakeholders to support the successful implementation of Making Tax Digital and the move to digital for both the organisations themselves and the people they represent.

While it is true that charities not registered for VAT will not be required to report under MTD those that are registered or operate VAT registered trading subsidiaries will be required to do so. CTG is actively involved in discussions with HMRC to ensure that the process of implementing MTD is as smooth and practical as possible for charities and at a proportionate cost.

This updated note highlights a net cost to the whole VAT registered business sector of £37m per year by 2022, but a high of £149m in 2019 due to transitional costs. Costs (ongoing and one-off) are broken down below.

On-going costs

These are expected to include:

• cost of moving to Making Tax Digital compatible software, from either paper or spreadsheet systems
• using bridging software to accommodate Making Tax Digital compatibility for spreadsheets
• seeing marginal increases in existing software costs through Making Tax Digital compatibility improvements being passed on to businesses

The estimated steady-state cost to the mandated business population is £52m, with these costs potentially eligible for full tax relief. Estimated costs depend on final software solutions, potential availability of free software to the mandated population and individual providers’ pricing structures. HMRC is working closely with the software developers to ensure a wide range of products will be made available at different price points.

Transitional (one-off) costs

Transitional costs are likely to cover:

• time spent in setting up new software or reviewing existing software processes
• a small minority of businesses may need to purchase new hardware or upgrade existing hardware
• additional accountancy or agents costs to facilitate the move to Making Tax Digital
• training of staff and familiarisation with Making Tax Digital and how it impacts on their business

Equalities impacts

Whilst Making Tax Digital is intended to help businesses get their tax right, with mandatory use of digital record keeping (for VAT only) and using Making Tax Digital compatible software to provide their VAT return information digitally, it is anticipated that some people with disabilities and those in rural locations with poor broadband services may find it more difficult to comply.

HMRC recognises that many people with disabilities use digital technology and are able to interact online using assistive technology. The decision to mandate, for Making Tax Digital requirements, the reporting of VAT for those business above the VAT threshold means that these businesses will already be familiar with the requirement to send information to HMRC electronically, and are likely to already do so, unless already exempted from the requirements to file VAT returns online. Businesses that are already exempt from engaging digitally will continue to be exempt and will not have to meet the obligations of Making Tax Digital. HMRC will ensure that clear guidance is widely provided and easily accessible for digitally excluded customers about the exemption process and will ensure that a mechanism is provided for an exemption to Making Tax Digital to be easily applied for through non-digital means.