HMRC consults on draft making tax digital regulations

Following the announcement on making tax digital income tax self assessment (MTD ITSA) at Autumn Statement 2023, HMRC has published revised draft regulations and notices for a short technical consultation. 

The current MTD ITSA regulations provide for a start date of 6 April 2024, so it is essential that these new regulations are laid before that date. As well as changing the start date, the amendments incorporate the changes announced in December 2022 and at Autumn Statement 2023. 

This is a technical consultation on the regulations, so does not provide an opportunity to make representations on the fundamentals of the policy. However, ICAEW will continue to challenge elements of the policy such as quarterly reporting.  

The consultation deadline is 12 January 2024. Please send your comments to Caroline Miskin by Monday 8 January.  

The regulations have been drafted as amendments to the original regulations, which makes them difficult to follow. However, a tracked changes version highlighting the amendments is shared with the kind permission of the Association of Tax Technicians. 

Specific aspects that members may wish to comment on include: 

• The deadline for filing quarterly updates. This is currently set at the fifth of the month following the end of the quarterly update period. ICAEW understands that HMRC may be considering giving an extra two days to align the date with the VAT return deadline. Would this be helpful?
• The lock-in period. Where a taxpayer’s gross income falls below the threshold, the current regulations require taxpayers to continue to comply with MTD ITSA requirements until their gross income has been below the threshold for three full tax years. This is unchanged in the draft regulations. Now that the threshold is £30,000 rather than £10,000 (from 2027/28) moving above or below the threshold may be a fairly common occurrence. Is the length of the lock-in period appropriate?
• Joining MTD ITSA. The general rule is that taxpayers need to join MTD ITSA from the start of the tax year after they have submitted a tax return showing gross income above the threshold. Where a taxpayer already in MTD ITSA starts a new source of income, the requirements apply to that new source of income from the start of the tax year on which it is first reported on a tax return. Is this the best way to determine start dates? 
• Quarterly update categories. The reporting categories do not quite match the self assessment SA103 and SA105. It is envisaged that the categories omitted would be included in the year end reporting only. Are the reporting categories for quarterly updates the ones that you would expect? 

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