The agile approach to Making Tax Digital for income tax self assessment (MTD ITSA) means that the functionality is constantly evolving. HMRC is hand-holding taxpayers in the pilot, so needs to manage numbers carefully. Together, these factors can mean apparently inconsistent messages about who can join and what functionality is available.
Details of who can and can’t join are available on gov.uk and can be summarised as follows:
|Can join if all the following apply||Can’t join if|
|Accounting period aligns exactly with the tax year (not 31 March)||Income tax charge (eg, high income child benefit or pension tax charges)|
|UK tax resident||Self assessment payment arrangement|
|Everything up to date (eg, no outstanding returns or liabilities)||Partner in a partnership|
|Registered for SA and submitted at least one return with self-employment or UK or foreign property source||Minister of religion, Lloyds underwriter or qualifying carer (foster carer)|
|Have a national insurance number||Bankruptcy or insolvency proceedings|
|HMRC holds an up to date address for the taxpayer||Third party capacitor acting (this does not include having an agent)|
In Agent Update 97, HMRC encourages those with the following types of income and claims to join the pilot:
- Self-employment income (including multiple self-employments)
- UK property income
- Gift Aid
- PAYE source income (but not with coded out debt)
- UK interest
- UK dividends
A lot more functionality has been developed by HMRC and is being tested on a small scale, but is not quite ready for wider testing. HMRC expects the following functionality to be made available in the coming months:
- Construction Industry Scheme deductions
- Private pension contributions relief claims
- Student loan repayments
- Additional information (SA101)
- Foreign income
- Voluntary class 2 national insurance contributions
- Recipients of transferable marriage allowance
- Capital gains tax reporting
Agents and taxpayers may be reluctant to join the pilot until they know that their MTD ITSA software can be used to report everything on their tax return, and to finalise their liability. It is worth bearing in mind that, by the 31 January 2024 deadline for 2022/23 returns, the functionality available in MTD software is expected to be much wider than what is listed above.
Joining the pilot involves:
- Maintaining digital records.
- Acquiring MTD ITSA compatible software – contact any of the providers on Find software that's compatible with Making Tax Digital for Income Tax. Most of the products listed as in development are in fact ready, and will move to the list of products available now, after quarterly updates for April/May/June 2022 have been submitted using those products.
- Signing up via a software developer. The functionality to sign up directly from gov.uk will be phased in for different groups of taxpayers in due course.
- HMRC checking the taxpayer’s national insurance number against a whitelist to ensure that the taxpayer is eligible to join.
- Joining from 6 April 2022, maintaining digital records, and submitting quarterly updates and end of period statements covering the whole of the 2022/23 tax year. As participation is voluntary, there are no additional penalty risks; the first penalty that might apply would be the £100 late filing penalty for a late self assessment tax return.
It is possible to withdraw from the pilot if, for example, a taxpayer’s circumstances change. These cases revert to self assessment.
The pilot and other MTD ITSA issues were covered in the June edition of MTDtalk.
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