Making tax digital deferral: update for “not-for-profit organisations not set up as a company”

Back in October last year, HMRC announced that non-profits that are "not set up as a company" would not have to use the Making Tax Digital (MTD) service for VAT until October 2019, and that there would be a pilot for those organisations that had been deferred, launching in Spring 2019. For more on the deferral announcement, see our previous blog post.

At the time, there was a question mark over charities created as bodies corporate, but not set up as a company under company law – for example, charities created by Royal Charter, or by statute.

Recently, the Charity Tax Group has reported that HMRC has clarified the situation: in addition to using the information supplied on registering for VAT to determine whether an organisation falls into a deferral category, it will also use the “notes to help you apply for VAT registration”.

These notes contain a definition of a corporate body as "a group of individuals identified by a particular name which acts as a single legal entity", including:

  • Limited companies (and overseas equivalent),
  • Companies set up by Royal Charter, Letters Patent or Acts of Parliament
  • Limited Liability Partnerships,
  • European Economic Interest Groupings, and
  • Friendly, industrial and provident societies.

Therefore, it seems that charities created by Royal Charter, Letters Patent or statute will be treated as companies, and so will not qualify for the deferral – unless they fall into another deferral category, for example, by being part of a VAT group, of course.

If they do not qualify for the deferral for another reason, such charities will be mandated to use the MTD service for VAT from 1 April 2019.

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