At the recent Annual Tax Conference CTG’s published its Annual Review 2017/18

“While we all continue to grapple with the uncertainties of what Brexit will mean for the tax system, one thing is certain – the future is digital. Charities can sometimes be slow to adapt to digital innovation (and they are not alone), but change is afoot, particularly in terms of the way they advertise, fundraise and operate internal systems. Much of our recent work (as highlighted in this Annual Review) and going forward is focused on the digitisation of the system and identifying areas where taxes need to develop and evolve to ensure they keep pace with technological developments.

“HMRC is taking the lead with the introduction of Making Tax Digital, a huge undertaking to automate and digitise VAT reporting on a quarterly basis. There will be no exemptions for charities or their trading subsidiaries (at least for VAT) unless they fall under the VAT registration threshold and, given the system will be live in April 2019, charities need to start preparing now and talking to software providers. We continue to work closely with HMRC to ask the thorny questions about how the reporting mechanisms will work in practice, what information will be required and how information will need to be digitally linked and stored. 

“Charities are increasingly fundraising online or using new payment mechanisms, but this has raised issues that had not been considered before in the context of traditional offline fundraising techniques. To their credit, the Government last year extended the Gift Aid Small Donations Scheme to contactless donations, but there remain a number of other future digital challenges for giving and Gift Aid, likely to be complicated further by new data protection responsibilities under GDPR. Following concerns that donors were not sufficiently informed about which types of donations are eligible for Gift Aid, CTG has been working with HMRC to introduce new donor education materials for online fundraising platforms. Our Gift Aid working group is at the forefront of this initiative and working hard to ensure that there is an improved understanding of how Gift Aid works and the benefits it brings to charities.

“We also have serious concerns that charities advertising through third party online platforms, including social media, may find that the charity zero rating does not apply if the users of those channels are deemed to have been selected. This is symptomatic of wider concerns that the VAT system is not keeping up with digital developments, with old rigid legislation lacking the flexibility to adapt and evolve, and that it thereby loses sight of policy objectives. The European Commission is making steps in the right direction with proposals to equate the VAT treatment e-books with paper books and we will be continuing to call on the Government for a review of VAT legislation to ensure that it keeps pace with technological developments and fundraising practice. If not, valuable reliefs risk being diluted and undermined.

“Lastly, it has been excellent to see how well CTG’s foray into the digital future has been received. The extensive summaries of taxes relevant to charities have proved a valuable resource for the sector and users and visits to the website have increased with an incredible 11,000 more monthly page views in March 2018 than when the website was launched in May 2016.

“My thanks go once again to Graham Elliott, CTG’s technical adviser, and our volunteer Management Committee – together they provide extensive support and expertise to the organisation. I would also like to thank you, our charity and Observer members, for your input and support – CTG could not make the same impact without it.

“I look forward to continuing this digital journey with all of you over the coming year. John Hemming, CTG Chairman.”