CTG Newsletter – 20 December 2017

Draft regulations and guidance for Making Tax Digital for VAT

HMRC has published the draft regulations that will introduce Making Tax Digital (MTD) for VAT. Also published is an Explanatory Note, a new Draft VAT Notice and an addendum outlining user journeys.

The draft regulations provide that VAT registered businesses (including charities) must keep an electronic account  of information specified in the amended regulations and use an approved form of software to prepare and render returns. The regulations provide exemptions based on turnover, an inability to use electronic systems for religious or practical reasons and for businesses subject to insolvency but exempt businesses may opt for the obligations in the amended regulations to apply to them if they wish. The amended regulations also provide rules for how business records should be preserved.

All the documents can be accessed here, where the main provisions are also outlined, but the headline news  is that information transfer between internal interfaces and with HMRC must be digital (and via third party software) where the records are part of the Making Tax Digital for Business (MTDfB) journey, although adjustments (such as partial exemption) will be able to be calculated separately and manually. HMRC does, however, plan a “soft landing” in the first year to allow organisations to transition to the new rules.

CTG will be reviewing this proposals closely as the processes proposed (particularly in related to digital links) appear to be slightly different from those outlined by HMRC when we last met them (details here). We will be seeking a further meeting with HMRC officials early next year to establish exactly what will be expected of charities and what likely cost and administrative implications are likely to be of compliance with these digital reporting requirements.

If you would be interested in attending a dedicated seminar on Making Tax Digital for VAT next year, please express your interest via e-mail to info@charitytaxgroup.org.uk

Consultation on the documents is open until 9 February 2018 and responses should be sent in to HMRC via email. Please also share your feedback via the comment box below.

2017 Gift Aid Round-up

CTG’s Vice-Chairman, Richard Bray, has prepared a new commentary summarising the various Gift Aid developments in 2017. His article covers developments relating to online fundraising & donor education, donor benefits, retail Gift Aid, GASDS and text donations, as well as looking forward to potential challenges next year.

He notes that CTG is now well represented on the HMRC Charity Tax Forum working group looking at ways to ensure that the Gift Aid system is fit for the future. As part of this group, CTG members have agreed to write two papers considering:

1. the impact of the General Data Protection Regulation (GDPR) on Gift Aid, particularly in relation to the future of enduring declarations
2. what the future of Gift Aid looks like, considering issues such as how to maximise Gift Aid in the face of digital transformation.

We would welcome feedback from members on these topics, so that we can ensure that the issues highlighted by both articles are representative of those being faced by the sector as a whole.

Changes to Scottish Income Tax Rate bands – implications for Gift Aid

As previously reported, the Scottish Government has published its Draft Budget for 2018-19, which includes proposals to set new Scottish rates of income tax, which diverge from the current UK rates. Concerns have been raised regarding exactly how this new approach will impact Gift Aid in Scotland, given that Gift Aid has been designed to work as part of a UK-wide tax system.

Asked for comment HM Treasury officials have told CTG:

“Ahead of the devolution of Scottish income tax powers, the Government discussed with charities the potential implications for Gift Aid of UK and Scottish income tax rates diverging. Having listened to their views and to ensure the effective operation of gift aid across the UK, the government decided that it would not make changes at that time.  This means that charities should continue to claim relief at UK basic rate whether the donor was or was not a Scottish taxpayer. The Government remains committed to the continued effective operation of Gift Aid in all parts of the UK and will continue to consider all issues affecting this and all other charity tax reliefs as part of its regular dialogue with the charity sector”.

Trusts Registration Service – informal deadline extension

The Trusts Registration Service (TRS) is a service that will provide a single online route for trusts and complex estates, to comply with their registration obligations and to obtain their Self-Assessment (SA) Unique Taxpayer Reference (UTR). For trusts which have already registered for SA, or for trusts which have not registered for SA but have incurred a tax liability other than income or corporate tax, the Association of Taxation Technicians and the Chartered Institute of Taxation have negotiated an extension to the registration deadline. This must now take place by 5 March 2018 (though given the informal nature of this extension, gov.uk still shows a deadline of 31 January 2018). More information on TRS, as well as a series of helpful FAQs, can be found here.

Round-up of other topical developments

• Lords Committee on charities: The Department for Digital, Culture, Media and Sport (DCMS) has published its response to the House of Lords Committee on Charities report, Stronger charities for a stronger society, which was published in March this year and made a series of 42 recommendations. The DCMS response considers each of the individual recommendations, which cover a wide range of topics from trustee training and development, reporting requirements and demonstrating impact, public sector contracts and ensuring that Gift Aid is fit for the future.
• Christmas giving: The Charity Commission and the Fundraising Regulator have published research on Christmas giving trends, which has found that younger people know more about the charities they donate to than other age groups. According to the research, there is a strong awareness within the 18-24 age range about the importance of making basic checks on a charity before giving, suggesting that young people are making informed choices about who they give to. Over half of people in this category said that they usually do checks on a charity before donating to them, compared with just 29% of over 75s.
• Charities Online: Version 1.2 of the charities technical pack and test service guidance has been added. Version 1.7 of the charities online recognition process has also been added. These updates are directed mainly at software suppliers, but if you have developed in-house Charities Online software this may be of interest.
• Finance (No.2) Bill: The Bill was considered in a Committee of the whole House on 19 December 2017 and no amendments were made. The remainder of the bill will now be considered in a Public Bill Committee which is scheduled to have its first meeting on Tuesday 9 January 2018, concluding by Thursday 18 January 2018. The membership of the Public Bill Committee has been announced by the Committee of Selection. Views of the Bill can now also be submitted to the House of Commons Public Bill Committee – more information here.

Get involved

CTG members are encouraged to

• Save the date of the Tax Conference – 15 May 2018.  We would welcome feedback from members on previous events and any suggestions for speakers or topics at next year’s Conference via the comment box here.
• Join the new Business Rates working group or tell us if you receive any correspondence from local councils reviewing any of your existing reliefs
• Join the Gift Aid practical issues working group in 2018 – read why here!
• Help us to improve the Gift Aid donor benefits guidance – submit feedback here
• Share their experience of a practical or technical charity tax issue by writing a commentary
• Share their feedback on how their charity has been affected by the Apprenticeship Levy so far (e.g. cost so far, amount of levy used or expected to be used)
• Share details of any challenges to VAT zero rating on advertising by agencies.
• Share your experiences of registering with the Trusts Registration Service (see above)

Send any comments to info@charitytaxgroup.org.uk or call the Secretariat on 02072221265.

CTG Newsletter Archive

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

• CTG Newsletter – 18 December 2017
• CTG Newsletter – 13 December 2017
• CTG Newsletter – 8 December 2017
• CTG Newsletter – 4 December 2017
• CTG Newsletter – 30 November 2017
• CTG Newsletter – 24 November 2017

CTG’s VAT case law tracker has also been recently updated.

Expert Commentaries

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

• 2017 Gift Aid round-up (Richard Bray)
• VAT case relating to ‘single supply’ and zero rated printed material (Graham Elliott)
• Corporate Criminal Offence – implications for charities (Ian Short and Tania Dimitrovich-Archer)
• Definition of a ‘sport’ for VAT purposes – English Bridge Union case (Graham Elliott)
• Relevant Residential and Relevant Charitable buildings: Clawback provisions – Balhousie Holdings case (Graham Elliott)
• Proposed new penalties for participation in VAT fraud (Edd Thompson and Juliet Bailey)
• Summary of recent VAT cases on partial exemption, sports supplies & charitable annexes (Graham Elliott)
• Benefits of joining the CTG Gift Aid practical issues working group (Keren Caird and Donna Perry)
• Iberdrola VAT case – Implications for Sveda? (Dermot Rafferty)
• Is a CASC a Charity (for Tax Purposes)? (Graham Elliott)
• Charity VAT Recovery – The Road Not Taken (Graham Elliott)
• VAT recovery for holding companies – MVM case and HMRC guidance (Dermot Rafferty)
• 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)
• 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 and newsletters

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.

Charity Tax Group change of bank details

A reminder that CTG’s bank details have now changed and should be used for all transactions going forward.

A letter on headed paper, confirming the changes can be downloaded at https://www.charitytaxgroup.org.uk/wp-content/uploads/Charity-Tax-Group-–-Change-of-Bank-Details.docx and there is notification of the change on the website here.

If you require any additional information or would like to discuss this further, please contact us at info@charitytaxgroup.org.uk or on 020 7222 1265.

We are very grateful to all members that have made a financial contribution towards our work in 2017 – this has been vital in ensuring we can continue to represent your interests to Government on important charity tax related issues. Donation forms will be circulated in early 2018 and we hope that you can continue to support our work.