Page 93 - LCNL Diwali Magazine 2022

Happy Diwa l i RAGHUVANSHI 2022 - 2023 89
Happy Diwali

Making Tax Digital for Income Tax Self-Assessments

The first phase of MTD was implemented in April 2019 whereby VAT registered businesses

with turnover above the VAT threshold were required to keep their records digitally and file the
VAT returns information to HMRC digitally using MTD compatible software.

From 06 April 2024, as part of the Government’s 10-year tax strategy to make the tax system

more resilient and effective, businesses, self-employed people and landlords will be required to
operate MTD ITSA in relation to trading and property income chargeable to Income Tax and Class 4 NICs if their

gross income from these sources is more than £10,000 during the tax year.

This will affect almost 4.2 million taxpayers with business and/or property income and they will be required to keep
their records digitally (for ITSA purposes only), provide digital quarterly updates and provide their ITSA returns
information to HMRC through MTD compatible software.

The new MTD ITSA regulations shall require a relevant person to keep and preserve their tax records electronically

and submit reports to HMRC through approved software. The report will consist of the business trading or property

income, allowable expenditure, claims and allowances or reliefs against income and will need to be submitted
for each tax year (for property business) or basis period (trading business). Interim reports will be required to be

submitted on fixed quarterly dates.

As with MTD for VAT, there will be transitional costs as well as ongoing costs to consider. Transitional one-off
costs will include time spent on familiarising with new requirements, training costs, purchase of hardware and/or

software and professional fees e.g., accountancy or agents’ fees. Continuing costs will most likely include additional

accountancy fees for quarterly reporting and software costs.

However, there are significant benefits of MTD ITSA in terms of cost efficiency and productivity and efficiency.

HMRC anticipates that once businesses implement MTD processes, it will be easier for businesses to get their tax
right and reduce errors, thereby making the management of tax affairs more efficient.

We expect more communication from HMRC as well as software providers in the coming months regarding MTD

ITSA, but it is important to get all your records in order ahead of time to avoid unnecessary delays in filing the
returns on time and getting it right at the first time. We advise you to work closely with your accountants and find

out what records you will be required to provide digitally.

Umesh Modi
Partner - Silver Levene LLP