The 2020 Self Assessment filing season was an unusual one. It started under lock down, with the challenges of remote staff working and receiving client information, and ended with a last minute extension. During it all, back in July, MTD (Making Tax Digital) mandation from April 2023 was quietly announced.
At Thomson Reuters we have been working closely with HMRC and will continue to do so. I assume it is fair to say that at the time of the announcement you may well have been focused elsewhere and had little capacity to think about the impact on how you will work with your clients. I thought now would be a suitable time for a quick reminder of what the implications are likely to be going forward.
This update is an initial step to providing monthly information on what is happening and what steps need to be taken to make sure you are prepared and have the correct tools in place to keep your clients compliant. This article focuses on some Frequently Asked Questions you and your clients may have.
What has been mandated?
For affected clients, with trading and/or rental income more than £10,000, quarterly reporting will be mandated from the accounting period starting on or after 6 April 2023.
Does mandation cover all my clients?
The April 2023 mandation date covers individuals and simple partnerships with trading and/or rental income over the limit. In this context, a simple partnership is one made up of individuals only. Trusts are excluded from the April 2023 mandation. Additionally, any incorporated entity is outside the scope of this MTD delivery, and MTD for corporates is pencilled in for pilot in April 2024, with mandation ‘not before’ April 2026.
What if the client is not mandated?
Those clients who would otherwise be mandated, but have combined trading and rental income below £10,000, will continue within Self Assessment. As will those clients with no trading or rental income.
What is the impact on my mandated clients?
For those not already doing so (and not otherwise “digitally excluded”), Digital Recordkeeping will become mandatory from the start of the accounting period.
In addition to an annual submission and declaration, in each trading/rental quarter (or more frequently if desired) an update of summary relevant income and expenses must be submitted to HMRC via software. There is a submission deadline of one calendar month from the end of each quarter.
What is the impact on me and my practice?
Firstly, you will have some clients within MTD, and others will remain within Self Assessment, and so you will have new internal processes and workflows to consider. Mandated clients will also probably look to you for advice on which digital recordkeeping tool to use, and how you will help them with this new quarterly process.
What should I do to start planning?
For now, the advice is simple – do not panic, but equally, do not ignore it! MTD will happen, but there are plenty of areas where there is opportunity to get ahead of the process, and Thomson Reuters will be on hand to guide you through it over the coming months. We will offer planning tips for getting your practice and clients ready together with the opportunity to take part in the MTD pilot (which commences in April 2021). We will continue with monthly articles and, as new products become available, we will run webinars to show progress.