HMRC has launched a programme of Structured Risk Reviews (SRRs) across the charity and not-for-profit sectors, signalling a more rigorous and data-driven approach to scrutiny, a personal finance expert has warned. The tax authority is intensifying efforts to recover lost tax revenue, with thousands of organisations potentially affected.
Details of the Crackdown
Siobhan Holmes, a partner specialising in charities and not-for-profit organisations at UK top 10 accountancy firm Azets, issued a warning about the new measures. She explained that HMRC will examine payrolls, tax returns, VAT returns, and Gift Aid claims in detail to see whether they correlate with public statements and whether tax has been underpaid. This approach is likely to uncover data previously not considered, meaning even minor discrepancies, inconsistencies, or unusual patterns can prompt a review.
Holmes cautioned that HMRC fact-finding reviews can be onerous, time-consuming, and often cause great anxiety for trustees and organisations under investigation. She advised seeking professional advice without delay if an organisation becomes subject to an SRR or if procedures may not stand up to review. The quicker action is taken, the more chance there is of mitigating potential penalties.
Background on VAT Schemes
Charities have previously been encouraged to wind down their use of an "aggressively marketed" scheme that boosts VAT recovery for care providers regulated by the Care Quality Commission. HMRC identified a scheme involving the growing use of VAT grouping structures by state-regulated providers to recover VAT on welfare service supply costs that would otherwise be exempt from VAT.
Holmes added that Azets achieved 100% positive feedback for charity expertise, technical competence, and overall service, a result they are proud to have maintained consistently year on year.
