We recently had the chance to ask what the burning questions were for accountants following the announcement that MTD for ITSA will be introduced in April 2023.
Read on to find out more about how the pilot is affected by SEISS, how your paper-oriented clients can be best served and more.
With thanks to Ian Katté, CFO at BTCSoftware, for his help in creating this MTD for ITSA questions answered blog.
Can clients who bring their records to me in paper format for me to enter into Excel still do this?
These clients could benefit from adjusting their year-end so that you can work on the technologically ready clients in year one and have more time to prepare with the clients who provide you with paper copies of their information.
By adjusting the client’s year-end from April 6th to March 31st, you effectively gain an additional year before they are mandated into MTD for ITSA.
Your clients will need to have digital records behind their quarterly updates; however, those records can be kept by their agent in a spreadsheet or in other software.
Will partnerships need to submit a quarterly assessment, or will it only be for individuals?
It will apply to partnerships which will need to submit their quarterly assessments along with their individual assessments. Partnerships are unable to join the pilot that is currently running.
Partnerships will be mandated to use MTD for ITSA (as with other qualifying businesses) for accounting periods starting on or after 6/4/2023. The same rules apply in respect of quarterly submissions.
Who is the pilot not suitable for?
In a nutshell, partnerships and any self-employed individual who has been paid a SEISS grant.
HMRC has not yet released data on current pilot uptake, but it seems likely that accountants are holding off signing up, considering those restrictions and the pressures of supporting clients through the pandemic.
Is the start date for 2022/23 tax returns that are filed in 2023/24 or 2023/24 tax returns filed quarterly/yearly?
Mandatory MTD for ITSA applies from the start of the first accounting period beginning on or after April 6th 2023. For example, if your client’s year-end is April 5th then the first mandated accounting period will be for the year ended April 5th 2024 – i.e. chargeable for the 2023/24 fiscal year – with a deadline of January 31st 2025 for finalising the taxable profit. Quarterly submissions for the year would likely be for the periods ended July 5th and October 5th 2023 and January 5th and April 5th 2024.
Will tax be payable quarterly or just once a year still?
Payment will continue to be made once a year in the same way as it is currently managed within the system of payments on account and a balancing payment on January 31st after the tax year.
Is the £10,000 threshold considering turnover or profit? And does this apply to both landlords and partnerships too?
HMRC confirmed that MTD for ITSA will be introduced for unincorporated businesses, landlords, partnerships and trusts with business or property income with gross income over £10,000.
HMRC’s report: applying lessons learned to MTD for ITSA
The last Making Tax Digital report on MTD for VAT from HMRC sought to highlight the lessons learned from the rollout to Income Tax Self-Assessment:
- Businesses should be encouraged to start keeping digital records ahead of time
- Agents will not need to create a new Agent Services Account
- The full benefits of going digital are yet to be realised
We summarised the MTD journey so far on accountingWEB – read the blog here.
Or look back on the stats behind the initial rollout of the Self-Employment Income Support Scheme with our summary of HMRC’s end-of-August SEISS report.
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