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An introduction to charity VAT - five things to take away.

Take a look at our five main points from our recent introduction to charity VAT event. 

About the author

Socrates Socratous

+44 (0)20 8037 3113
socratousS@buzzacott.co.uk
LinkedIn

Thank you for attending our first charity VAT event in 2019, we're really glad that so many of you made it on the day, and hope you found answers to your questions. From the feedback we had on the day and since the event, we've put together some useful points for you to take away to give you a steer on dealing with your VAT.

If you have any further questions, please give us a call.  

 

Five things to take way from the event:

  • Do we know the VAT liability of the supplies made by the charity – this affects not just the VAT that might be payable but also the entitlement to VAT recovery 
  • Is our organisation maximising the use of zero rate reliefs – As most charitable organisations can’t recover VAT, the best way of mitigating the cost is not to be charged VAT in the first place where possible
  • Is the VAT recovery method fit for purpose and when was it last reviewed – changes in activity or structure might mean that the existing VAT recovery method is no longer producing a fair and reasonable result 
  • Do we have land/property transactions to consider – projects of this nature invariably involve large potential VAT costs and any opportunity to reduce the VAT cost requires planning from the outset  
  • Are we ready for Making Tax Digital – Whilst HMRC are taking a light touch to penalties during the ‘soft landing’ period, it will be important that organisations use this period to acquaint themselves with the long term requirements of digital record keeping.

 

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You might also be interested in… Making Tax Digital Updated VAT Notice published.

About the author

Linda Skilbeck

+44 (0)20 8037 3114
skilbeckl@buzzacott.co.uk
LinkedIn

The notice confirms that ‘the soft landing period’ (the period of time allowed for organisations to have digital links in place between all parts of their functional compatible software) is to be extended to 12 months after the mandated start date. The extension should be a welcome relief to many organisations who are fearful that they won't be able to comply within the time frame or feel rushed into picking a software provider and want more time for testing. 

In practice, this means that businesses or charities who have a deferred start date of 1 October 2019, such as VAT groups, will not have to implement full digital links at the back-end of their VAT processes until October 2020. This is six months later than the original April 2020 implementation date, giving more time to test processes and review the software available from third party providers.

Those with a mandated start of April 2019 will still need to have digital links implemented by April 2020. In short, this means that organisations cannot ‘cut and paste’ information from one software programme to another, or note down invoice details by hand and use this to manually update different parts of the system. However HMRC say that linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, is a digital link. And the transferring of such spreadsheets via email, memory stick or flash drive in such a way which enables an agent to ‘import’ the data into their own software will also constitute a digital link.

Buzzacott’s very own HMRC approved MTD compliant bridging solution is now listed on HMRC’s website. This cloud-based solution will be easy to use, competitively priced and will enable organisations to meet the demands of MTD in order to submit their UK VAT returns after the April 2019 deadline. In addition, the system allows organisations to keep track of returns previously submitted and perform certain validation checks on VAT returns prior to submission.

View the full version of the updated VAT Notice 700/22: Making Tax Digital for VAT here.