CTG Newsletter – 14 July 2017

New Making Tax Digital timeline and protection for trading subsidiaries with turnover below the VAT threshold

HM Treasury has confirmed that a new timeline for the implementation of Making Tax Digital (MTD) proposals will be put in place when changes are brought forward as part of the Finance Bill.

Following concerns raised by a number of sectors and organisations about the scope and pace of changes, the Treasury is taking a number of steps to ensure that the MTD agenda is rolled out in a way that offers businesses enough time to adapt to it. Under the new timetable:

• only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. The smallest businesses will not be required to use the system, although they can choose to do so voluntarily.
• they will only need to do so from 2019
• businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

HMRC has updated its policy papers on Making Tax Digital to reflect the current policy position and timescales. The papers note:

“We expect many of these businesses to take the opportunity to provide quarterly updates for other taxes too, but there will be no mandatory requirement to do so. Similarly, businesses that are not VAT registered and those below the VAT threshold who have voluntary registered for VAT can opt to join Making Tax digital for Business, giving them the choice of whether to opt to use commercial software to keep track of their tax affairs digitally and update HMRC on a quarterly basis.

“By introducing Making Tax Digital for Business on a voluntary basis for most and only making it mandatory for those who already interact with HMRC regularly and digitally, we can smooth the transition maximising the opportunities of a modern digital tax system.

“The Government has committed that it will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.”

Charities are already exempt from reporting requirements under MTD, but this development means that charity trading subsidiaries – for which there is no blanket exemption – will not be required to keep digital records at this stage. This is potentially very positive news for smaller trading subsidiaries.

We would welcome feedback from members on how many of their charity trading subsidiaries have a turnover that exceeds £85,000. Please let us know at info@charitytaxgroup.org.uk. 

CTG is continuing to call for charitable trading subsidiaries to be exempted completely from MTD requirements; our most recent consultation response can be read here.

Finance Bill update – including Museum & Galleries Tax Relief

The Financial Secretary to the Treasury Mel Stride has made the following Written Ministerial Statement in respect of the Finance Bill:

“The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the general election. The then-Financial Secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.

“The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions. Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced.

HM Treasury officials have contacted CTG to provide an update on the museums and galleries tax relief, confirming that this would be included in the Finance Bill and that the relief will apply to expenditure incurred from 1 April 2017.

Round-up of other topical issues

• HMRC Annual Report and Accounts for 2016-17: The report shows that HMRC brought in an additional £29 billion by cracking down on the minority of individuals and businesses who try to not pay the tax they owe, while suggesting that it has improved customer service for all taxpayers. The report also states that HMRC:
  • is transforming tax and payments for customers with contact centre staff now available seven days a week and answering phone calls in less than four minutes in 2016/17
  • is marking the seventh consecutive year of record total tax revenues, collecting a total of £574.9 billion – £38.1 billion more than last year
  • generated record compliance yield of £28.9bn through our work to stop avoidance, evasion and organised crime; more than ever before
  • has over the last six years brought more than 500 serious organised criminals to justice. Investigations and enforcement action against organised crime generated or protected £3.2 billion in compliance yield in 2016-17
  • handled more than 1,200 cases heard in courts and tribunals – winning 83% and protecting £15 billion in tax revenues
  • helped more than nine million individuals to access online services with more than five million businesses having access to their online account to file, pay and obtain help.
  • The UK tax gap (which is the estimated difference between the amount of tax HMRC actually
    collects and the amount that in theory should be collected) for 2014-15, published in Measuring Tax Gap 2016, which are the latest figures available, is estimated at 6.5% of total liabilities. There is an overall downward trend from 8.3% in 2005-06 to 6.5% in 2014-15.

• Tax Assurance Commissioner’s Annual Report: This report has also been published an outlines HMRC’s performance in resolving disputes with taxpayers for the period from April 2015 to March 2016.

• Charity Governance Code: Following recent consultations, the new, updated version of the Charity Governance Code has been published on its own website. The new Code is not a legal or regulatory requirement but sets out the principles and recommended practice for good governance. The Charity Commission has also withdrawn its Hallmarks of an Effective Charity guidance in favour of directing people to the new code.

• Charity Commission Reports: The Charity Commission has published
  • Annual Report and Accounts 2016/17
  • Trust and Confidence in the Charity Commission Report

• European Economic and Social Committee on VAT on e-publications: The Committee has stated: ‘The amendments to the VAT rates applicable to e-publications rules would eliminate the distinction between physical and non-physical publications, and ensure neutrality in this market. However, whilst welcoming the elimination of this competitive distortion, the EESC is mindful of the risk that such elimination carries for the VAT base. The EESC also notes that the proposed measures are perceived by the European Commission as a prelude to wider reform of the EU VAT rate structure, and it is concerned about the impact that such de-harmonisation would have upon businesses engaging in cross-border trade, particularly SMEs.’

• Self Assessment – Ministers of religion: The guidance ‘Service benefit cap calculation’ on page 4 of the Self Assessment: Ministers of religion (SA102M) employment income form has been corrected.

• Ealing Council VAT case: The CJEU has ruled that UK legislation wrongly taxes qualifying sport provided by local authorities as it cannot allow an exemption for (say) charities and deny it to local authorities.

CTG Newsletter Archive

Members can catch up on CTG’s recent newsletters using the links below:

• CTG Newsletter – 11 July 2017
• CTG Newsletter – 5 July 2017
• CTG Newsletter – 29 June 2017
• CTG Newsletter – 22 June 2017
• CTG Newsletter – 20 June 2017
• CTG Newsletter – 15 June 2017
• CTG Newsletter – 9 June 2017
• CTG Newsletter – 1 June 2017

CTG Commentaries

Read our expert commentary pieces and leave your comments and queries:

• Iberdrola VAT case – A dilution of Sveda? (Dermot Rafferty) *NEW*
• VAT recovery for holding companies – MVM case and HMRC guidance (Dermot Rafferty) *UPDATED*
• Professional negligence and failed tax avoidance schemes (Sonia Ferreira)
• Definition of a ‘sport’ for VAT purposes – new AG opinion (Graham Elliott)
• Business rates valuations for museums (Colin Hunter)
• First experience of submitting a Common Reporting Standard (CRS) return (CTG)
• Construction of Relevant Charitable Purpose (RCP) buildings – position of sub-contractors (Les Howard)
• Supplies to local authorities – Healthwatch Hampshire VAT case (Graham Elliott)
• Brockenhurst College VAT case – implications for charities (Graham Elliott)
• Filing charity trading subsidiary tax returns and charity accounts (Justin Bevan)
• Adecco appeal on the VAT treatment of temporary workers dismissed (Graham Elliott)
• AG Opinions on the VAT cost-sharing exemption – implications for charities (Graham Elliott)
• Have you paid enough tax to cover your Gift Aid donations? (Kevin Russell)
• Off-payroll working: Major changes from April 2017 (Susan Ball)
• Update on “Economic Activity” and the fate of the Lord Fisher test (Graham Elliott)
• Durham Cathedral VAT case and Sveda – implications for charities (Graham Elliott)
• Hire fees for stalls at fairs – implications of the Kati Zombory-Moldovan case (Graham Elliott)
• Common Reporting Standard – Top 10 tips for charities (Alana Petraske)
• Charity Authorised Investment Fund (CAIF) launched (Grania Baird)
• Longridge on the Thames VAT case – implications for charities (Graham Elliott)
• Implications of Brexit for charity tax (John Hemming)
• Implications of the Hallé case for the philanthropic exemption (Graham Elliott)
• Helping you find your way – the new Charity Tax Group website (John Hemming)

Please contact us at info@charitytaxgroup.org.uk if you would be interested in contributing a commentary piece.

CTG website

Do you have colleagues/friends in other charities that would benefit from receiving CTG’s newsletters? If so, please share this link to a page with full details about membership. Thank you again for supporting CTG in 2017.

Charity and Observer Members are reminded that their membership is on an organisational basis and that there is no limit of the number of subscribers to the website per organisation. If you think a colleague would benefit from getting access to the website and newsletters directly, please encourage them to register online at www.charitytaxgroup.org.uk/join-us/ selecting your organisation from the drop-down box.