Charities may have to file digital tax returns every quarter unless they respond to a government consultation on the subject, advisers have warned.
HM Revenue & Customs is consulting on proposals to require organisations to maintain digital tax records and submit them using software or apps that are compatible with HMRC’s own.
Private sector representatives have already expressed concern about the requirement to file “at least quarterly”, with the ICAEW warning that it could increase businesses’ administrative burden.
Charity Tax Group director Chris Lane told Civil Society News that government ministers are minded to grant an exemption for charities, but need to see sufficient support for doing so.
“They want charities to confirm what they are thinking and to put a sensible case forward,” he said. “Our feeling is that an exemption would be preferable, but that there should be lots of efforts to encourage charities to take part voluntarily. Clearly digital is the future.”
The issue was also raised at this month’s Charity Finance Summit by Socrates Socratous, director of SOC VAT Consultants.
Few charity delegates the room were aware of the consultation when asked by Socratous.
“Silence will only allow HMRC to impose what they see fit,” he said.
Voluntary process
HMRC’s consultation does state a willingness to provide an exemption for charities: “There are significant potential benefits for charities in maintaining digital records and in using software to update their digital tax account where they do need to make a return for Corporation Tax or Income Tax Self-Assessment.
“However, HMRC considers that due to their unique tax status and for the reasons set out above, charities should be exempted from the digital update requirements. Instead, it will be a voluntary process.”
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