Making Tax Digital is just around the corner – is your accounts system ready?

Making Tax Digital (MTD) is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers. The roll out starts on 1 April 2019 with MTD for VAT. From that date, VAT-registered businesses above the threshold of £85,000 turnover will have to keep digital records and submit VAT returns using compatible software. The following Q&As should help you in what to do next.

Q: – Is my current software compatible?
A: – If you have a Cloud-based accounts package, you probably are or will be ready. We would advise you ask the question now. If you have a non-Cloud package you may well not be ready, depending on the version you are running.

Q: – I use excel or paper to prepare my VAT returns and key them into HMRC website, what do I need to do?
A: – From the 1st April you will no longer be able to key figure directly into HMRC website.
HMRC will accept some types of spreadsheet but they need to be linked and submitted via compliant software. We would recommend talking to us about moving your accounts system NOW to an online system so as you are ready for the deadline.

Q: – My software is compatible, but I key my VAT return details into HMRC website, can I continue this?
A: – No, however you should be able to set your accounts system up to submit the returns for you.

Q: – Do you have a list of accounts packages that are ready?
A: – The list is changing all the time as companies complete testing.

The major products that have confirmed are compliant or will be are:

• Sage 50c Version 24 above (note the c versions of Sage)
• Sage 200cloud spring 2018
• Sage 200c 2011 to winter 2017 (you will need an additional module to make you compliant)
• Xero
• QuickBooks – Online versions
• Sage Accounting (formerly Sage One)

HMRC has a full up to date list here

HMRC plan to roll out its next phase after April 2020, while this like target the self-employed and landlords.

If you would like any assistance with your software, please contact us on the details below:

Keith Knight – Head of Client IT Support
Wilson Henry LLP
145 Edge Lane, Liverpool, L7 2PF
T +44(0)151 264 8888
E [email protected]

Top tips for operating charity gift aid

1. How does Gift Aid work?

Only donors who pay UK income tax and/or UK capital gains tax (CGT) should donate under Gift Aid. A donation with a valid Gift Aid declaration is assumed to have been paid net of basic rate income tax which charity can reclaim from HMRC. This is now 20%, so the Gift Aid claim by the Charity would be 25% of the 80% deemed net donation amount.
If the donor is a higher rate taxpayer, they can claim the extra tax relief through a self-assessment tax return or by asking HMRC to amend their tax code.

2. Donations that can be Gift Aided

Gift Aid is available on donations of money from UK income tax and CGT payers. This includes individuals, unincorporated sole traders and partnerships or LLPs, In the latter, each partner is required to provide a declaration for their share.

3. Gift Aid declarations

There are two types of Gift Aid declaration: single donation declarations, for example, ‘please Gift Aid the enclosed donation’; or multiple declarations, for example, ‘please Gift Aid the enclosed donation, all donations make in the previous 5 years and all future donations’.
Declarations can be in writing or verbal and must conform to HMRC’s regulations, which provides model written declarations and a procedure to follow for verbal declarations. Charities are strongly advised to use and follow these.
Charities should retain written Gift Aid declarations and HMRC’s specified evidence of oral declarations for at least 6 years after the last donation to which the declaration relates.

4. Who can claim Gift Aid?

The following entities can make Gift Aid claims: UK community amateur sports clubs (‘CASCs’), UK charities, and charities established in other EU or European Economic Area (EEA) states

5. How to claim Gift Aid

The charity or CASC must first register with HMRC by adding the Gift Aid service to its online account. It can then submit Gift Aid claims in one of three ways:
• direct database claim – from compliant Gift Aid management software to HMRC;
• spreadsheet claim – complete and upload a template spreadsheet from the HMRC website – it can list up to 1,000 donors; or
• paper claim – a paper form (ChR1) ordered from the HMRC charities helpline can list up to 90 donors. Use original forms only.
Claims must list the donor name, home address, donation date and amount. UK addresses must include a postcode. You can aggregate up to £1,000 of donations of £20 or less onto a single claim line and for sponsored events, you can list donations by event participant rather than donor, though individual donations of £500 or more must be included separately.

6. Claim time limits

The time limits depend on the type of claimant. Corporate charities and CASCs can claim in the financial year of the donation or following four financial years. Charitable trusts can claim in the tax year of the donation or following four tax years.

7. Gift Aid inspections

Be aware of the risks of making incorrect or invalid claims. HMRC risk assesses and checks Gift Aid claims either by visiting or asking for supporting evidence. HMRC allows a charity to try to correct the problem, for example seeking a replacement for a lost declaration. For uncorrected problems HMRC establishes a sample error rate by value, then extrapolates this over the entire claim under review – and possibly to all claims in the same year – and in the past four or six years and demands repayment and interest.
Contact Wilson Henry on 0151 264 8888 for more information