HM Revenue & Customs has yielded to pressure to withdraw proposed VAT reforms that would punish charities for any mistakes they make during self-assessment of their own partial exemptions.
The draft legislation would have asked charities to assess their own exemptions and then pledge that this was fair and reasonable "to the best of their knowledge and belief". If HMRC had disagreed, it would have had the power to reassess a charity's exemptions for the previous three years.
But charity finance experts opposed these plans during a consultation held by HMRC. Adrian Houstoun, VAT partner at law firm Kingston Smith, said: "This was a horrendous new concept. HMRC could easily have disagreed with a charity's assessment of what was fair."
HMRC has since changed its proposals. The new legislation, which would appear not to give officials the right to assess three years in arrears, should be in place by April next year.