Definition of a not for profit organisation not set up as a company

Members will recall that HMRC has announced that it will delay mandation of MTD VAT for a small minority of VAT registered businesses until 1 October 2019. This will include trusts, ‘not for profit’ organisations that are not set up as a company, and VAT groups.

HMRC has now clarified the meaning of ‘not for profit organisations that are not set up as a company’. HMRC had already explained that they will use the information supplied when registering for VAT to determine whether or not a taxpayer falls within any of the deferral categories, and they have now added that this will involve using the ‘notes to help you apply for VAT registration’. These notes define a corporate body as:

‘A group of individuals identified by a particular name which acts as a single legal entity. Included here are:

• Limited companies (and overseas equivalent)
• Companies set out by Royal Charter, Letters Patent and Acts of Parliament
• Limited Liability Partnerships
• European Economic Interest Groupings
• Friendly, industrial and provident societies.

On this basis, it appears that unless a charity falls into one of the other deferral categories they will not be deferred and MTD will be mandated for the first VAT return on or after 1 April 2019.

We are grateful to our partners at BUFDG for this helpful update.

Members are reminded that HMRC has not announced an extension of the “soft landing”, which means all organisations will be required to implement the digital link requirements by April 2020.

Lords Committee recommends implementation of MTD is delayed

The House of Lords Economic Affairs and Finance Bill Sub-committee has recommended that the Government delay the mandation of its Making Tax Digital programme, citing concerns over its impact on small businesses.

The committee’s report warns that the Government may well have overlooked the concerns of the smallest businesses; in particular the impact that the added costs in purchasing software, as well as time dedicated to training employees in how to use the software, will have on those firms whose resources are already limited.

In its summary the committee recommended that the Government:

• Defers the introduction of mandatory Making Tax Digital for VAT by at least one year, while encouraging businesses to join voluntarily;
• Plans a staged transition for businesses to join Making Tax Digital for VAT and future stages of Making Tax Digital which allows for businesses, not just HMRC, to be fully ready;
• Waits until at least April 2022 to implement the next stages of Making Tax Digital, to allow time to learn lessons from the implementation of Making Tax Digital for VAT; and
• Publishes its plan for the long-term development of Making Tax Digital, to encourage businesses to choose digitalisation for productivity, efficiency and modernisation reasons rather than just tax compliance.