How charities can prepare for Digital Tax Filing

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Donna Torres offers advice on how charities and other third sector organisations can get ready for Making Tax Digital

 

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19th June 2019 by TFN Guest 0 Comments

The Government launched new tax rules earlier this year. Called Making Tax Digital (MTD), the legislation currently applies to businesses making over 85k in taxable turnover. Charities have been given a later deadline of October to get ready.

Making Tax Digital is part of the Government’s vision to create a truly digital Britain. So it’s important the charitable sector gets up-to-speed with the latest technologies to ensure it doesn’t get left behind.

According to the Future Charity report published by Manifesto, 57% of charity employees surveyed believed the lack of tech know-how is one of the greatest hindrances to the sectors’ development.

The Tech Trust report  meanwhile found that 59% of UK charities don’t have a digital strategy, with the majority lacking investment in the tools and training needed to implement one. The same report suggests charities with a digital strategy are in a far better position than those without.

Donna Torres

Donna Torres

For those charities that need to submit tax digitally under Making Tax Digital, digital tools aren’t a nice to have, but a mandated requirement. If you don’t comply, you’ll be fined, so it’s worth getting your ducks in a row, now. With the summer holidays just around the corner, October will come around sooner than you think. Here’s what you need to do:

  • Swat up: A good place to start is looking at some of the handy resources available, such as Xero’s Making Tax Digital hub .
  • Find out if you sit in HMRC’s ‘complexity’ group: Check with HMRC  if you’re unsure - as the MTD scheme is just beginning, HMRC is expected to be sympathetic to late adopters.        
  • Understand the numbers: What is your taxable turnover for the tax year you are filing for? This might be a good time to speak to an accountant if you haven’t already.
  • Don’t be scared of cloud technology: we found many businesses still use paper to file their accounts. Paper receipts take time to organise and risk being lost or spoilt. Likewise you don’t want to be storing your accounts all in one place on the office computer in case it breaks. The beauty of cloud computing is that the same information is securely stored on lots of different computers, so your files are always backed up and easy to find.      
  • Sign up to MTD for VAT with HMRC: If you are using an accounting software company that’s MTD compliant, then happy days, being ready for MTD just got even easier.

Still unsure about what you need to do? Call the HMRC VAT helpline or visit Xero’s MTD hub for more information.

Digital tax filing means greater efficiency, transparency and filing accuracy. It’s a huge step forward for the UK. But of course, with any changes like these, it might seem like yet another thing you’ve got to deal with. There’s no getting away from it, so your best bet right now is to speak to your accountant - they’ll be able to help take the pain away. The whole process is a lot simpler than you might think. 

Donna Torres is Director of Small Business at Xero

Xero are a HMRC facilitation partner for Making Tax Digital