The Treasury has announced a 12-month delay to the introduction of making tax digital (MTD) for income tax, which will now be brought in for the 2024/25 tax year. Basis period reform is also to be moved back by 12 months.
The Income Tax (Digital Requirements) Regulations, SI 2021/1076, make provision under TMA 1970 Sch A1 (which is not yet in force) for digital reporting and record keeping in relation to making tax digital for income tax.
The regulations provide for persons with profits from a trade, profession or vocation, or profits from a property business, which are chargeable to income tax and exceed £10,000 to follow the rules for MTD for income tax from 6 April 2024.
MTD for income tax requires a business or landlord to keep and preserve their tax records electronically and to submit reports to HMRC using approved software. A report of the business’s trading or property income, allowable expenditure and claims for allowances or reliefs against such income must be submitted in relation to each tax year or basis period (trading businesses), and interim reports must be submitted quarterly on fixed dates.
A draft of these regulations was released for consultation in 2017. A number of changes have been made since that draft following responses to the consultation and further consultation with representative bodies.
HMRC has also published tax information and impact note extending the requirement to operate MTD to the 4.2m taxpayers with business and/or property income over £10,000, including landlords, sole traders and partnerships, for their income tax obligations.
These changes will apply to businesses, self-employed individuals and landlords who have profits chargeable to income tax and pay class 4 NICs.
See bit.ly/MTDchanges.
In a written statement, the Treasury announced the following changes:
The treasury has published the Finance (No, 2) Act 2017, Sections 60 and 61 and Schedule 14 (Digital Reporting and Record-Keeping) (Appointed Day) Regulations, SI 2021/1079, which bring the MTD for ITSA legislation in TMA 1970 Sch A1 into force from 6 April 2024.
On basis period reform, the government intends to set out next steps alongside its response to the consultation. HMRC’s published guidance does not appear to indicate the government’s view on whether basis period reform is likely to be in place before the introduction of MTD for ITSA, as suggested in recent feedback from the professional bodies.
HMRC has also published a policy paper which suggests ‘what MTD might look like in practice for businesses and individuals joining MTD in the coming years’ and offers an assessment of the potential costs and benefits of MTD for businesses, including the implications for additional accountancy/agent costs. See bit.ly/customerbenefitsMTD.
The Making tax digital for business: stakeholder communications pack guidance has been updated which supports partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.
The CIOT and ATT welcomed the delay, but both professional bodies warned that there was still much to be done to ensure that MTD delivers its purported benefits without adding significant costs and burdens for businesses and their advisers. They urged HMRC to set out a detailed implementation roadmap to ensure there is adequate time for software development, testing and communication in time for the launch of MTD for ITSA.
Alison Hobbs, chair of the joint CIOT and ATT Digitalisation and Agent Services Committee, said: ‘The delay gives HMRC a fighting chance of achieving the goals of MTD while limiting the confusion and costs for individuals who are reeling from the impact of the pandemic and, for some, the consequences of Brexit.’
However, Hobbs warned that HMRC needed to make full use of this extra year. ‘Our tax adviser members report that it has been difficult to get clients engaged with MTD for ITSA because of uncertainty with the project up to now,’ she said. ‘We now need to see a marked increase in the number of taxpayers taking part in the pilot, as well as an increase in the number of software products available.
‘We urge the government to use the extra time to assess the effectiveness of MTD for VAT, as well as whether the administrative burden it is imposing on business is reasonable,’ she added.
Hobbs thought it sensible that excluding partnerships from the initial wave of MTD for ITSA was a sensible move. ‘It is increasingly clear that imposing the digital requirements on partnerships will be challenging because of the way partnerships are managed and taxed. In addition, many large partnerships and limited liability partnerships (LLPs) have an international dimension which creates added complexity,’ she said. ‘We hope the deferral until April 2025 for general partnerships will give sufficient time to enable these issues to be ironed out. But LLPs want some certainty about when they will be mandated into MTD for ITSA so they can also have adequate time to prepare. HMRC needs to say soon when LLPs will have to comply with the regime.’
(See also page 8.)
The Treasury has announced a 12-month delay to the introduction of making tax digital (MTD) for income tax, which will now be brought in for the 2024/25 tax year. Basis period reform is also to be moved back by 12 months.
The Income Tax (Digital Requirements) Regulations, SI 2021/1076, make provision under TMA 1970 Sch A1 (which is not yet in force) for digital reporting and record keeping in relation to making tax digital for income tax.
The regulations provide for persons with profits from a trade, profession or vocation, or profits from a property business, which are chargeable to income tax and exceed £10,000 to follow the rules for MTD for income tax from 6 April 2024.
MTD for income tax requires a business or landlord to keep and preserve their tax records electronically and to submit reports to HMRC using approved software. A report of the business’s trading or property income, allowable expenditure and claims for allowances or reliefs against such income must be submitted in relation to each tax year or basis period (trading businesses), and interim reports must be submitted quarterly on fixed dates.
A draft of these regulations was released for consultation in 2017. A number of changes have been made since that draft following responses to the consultation and further consultation with representative bodies.
HMRC has also published tax information and impact note extending the requirement to operate MTD to the 4.2m taxpayers with business and/or property income over £10,000, including landlords, sole traders and partnerships, for their income tax obligations.
These changes will apply to businesses, self-employed individuals and landlords who have profits chargeable to income tax and pay class 4 NICs.
See bit.ly/MTDchanges.
In a written statement, the Treasury announced the following changes:
The treasury has published the Finance (No, 2) Act 2017, Sections 60 and 61 and Schedule 14 (Digital Reporting and Record-Keeping) (Appointed Day) Regulations, SI 2021/1079, which bring the MTD for ITSA legislation in TMA 1970 Sch A1 into force from 6 April 2024.
On basis period reform, the government intends to set out next steps alongside its response to the consultation. HMRC’s published guidance does not appear to indicate the government’s view on whether basis period reform is likely to be in place before the introduction of MTD for ITSA, as suggested in recent feedback from the professional bodies.
HMRC has also published a policy paper which suggests ‘what MTD might look like in practice for businesses and individuals joining MTD in the coming years’ and offers an assessment of the potential costs and benefits of MTD for businesses, including the implications for additional accountancy/agent costs. See bit.ly/customerbenefitsMTD.
The Making tax digital for business: stakeholder communications pack guidance has been updated which supports partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.
The CIOT and ATT welcomed the delay, but both professional bodies warned that there was still much to be done to ensure that MTD delivers its purported benefits without adding significant costs and burdens for businesses and their advisers. They urged HMRC to set out a detailed implementation roadmap to ensure there is adequate time for software development, testing and communication in time for the launch of MTD for ITSA.
Alison Hobbs, chair of the joint CIOT and ATT Digitalisation and Agent Services Committee, said: ‘The delay gives HMRC a fighting chance of achieving the goals of MTD while limiting the confusion and costs for individuals who are reeling from the impact of the pandemic and, for some, the consequences of Brexit.’
However, Hobbs warned that HMRC needed to make full use of this extra year. ‘Our tax adviser members report that it has been difficult to get clients engaged with MTD for ITSA because of uncertainty with the project up to now,’ she said. ‘We now need to see a marked increase in the number of taxpayers taking part in the pilot, as well as an increase in the number of software products available.
‘We urge the government to use the extra time to assess the effectiveness of MTD for VAT, as well as whether the administrative burden it is imposing on business is reasonable,’ she added.
Hobbs thought it sensible that excluding partnerships from the initial wave of MTD for ITSA was a sensible move. ‘It is increasingly clear that imposing the digital requirements on partnerships will be challenging because of the way partnerships are managed and taxed. In addition, many large partnerships and limited liability partnerships (LLPs) have an international dimension which creates added complexity,’ she said. ‘We hope the deferral until April 2025 for general partnerships will give sufficient time to enable these issues to be ironed out. But LLPs want some certainty about when they will be mandated into MTD for ITSA so they can also have adequate time to prepare. HMRC needs to say soon when LLPs will have to comply with the regime.’
(See also page 8.)
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