MTD ITSA: Are you ready for the first quarterly submission?

The first quarter of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is now effectively complete, and attention now turns to the first quarterly submission due by 7 August.

For many sole traders and landlords, this will be a true test of the digital processes and systems they have put in place and so it is important that you have everything in order ahead of the deadline.

Are your records complete and compliant?

Maintaining digital records consistently, rather than retrospectively, has presented a significant hurdle for lots of those affected by the changes.

Therefore, as you prepare for the first submission, it’s worth checking that all income and expenses have been captured digitally and are up to date; that transactions are correctly categorised in software, and that you aren’t sitting on a backlog of paperwork.

MTD ITSA quarterly submissions: Preparation is key

Those within scope of the rules must supply a complete summary of income and expenses for each period, via compatible software, to HMRC.

These quarterly submissions are reliant on accurate, real-time data, and you should have a level of confidence that the figures are reasonable and consistent.

Incomplete records will undoubtedly make the submission process more complicated and time-consuming, but being proactive about preparations means you have time to remedy oversights, and to gather missing information should you need to.

We anticipate that this first submission will highlight sticking points for a number of taxpayers – for example, gaps in software set-up, confusion over what information needs to be included, and uncertainty around how to treat certain types or income and expenses – but, in doing so it should help to identify improvements that can be made ahead of the next quarterly update.

Tax position and planning opportunities

Whilst compliance is essential, it is important not to overlook the opportunity MTD ITSA affords you to review your tax position throughout the year, and to plan more effectively for your tax liabilities.

Consider, ahead of the deadline:

• What do your current figures suggest about your likely tax liability?
• Are your payments on account sufficient, or could there be a shortfall?
• Do you need to adjust your cash flow planning, to stay ahead?

We are keen to help our clients take advantage of the real-time data that they will have access to, to more proactively manage their finances and tax affairs, if they are not doing so already.

Common risks and next steps

With the first deadline approaching, it is worth reviewing records and software input to ensure a smooth submission and to avoid recurring issues. We would recommend taking the following steps:

• Set aside time to review and tidy up your records, if necessary
• Consider running your quarterly report in advance, not just on deadline day
• Make every effort to resolve any uncertainties around treatment or classification
• Speak to your accountant/tax adviser early if anything is worrying you

If you have agreed with us that we will process your records and prepare your first MTD ITSA submission, you must supply your records by no later than 15 July. This deadline ensures that we have sufficient time to prepare and send you the report for approval, and to submit the return to HMRC by the 7 August.

How can we help?

The first MTD ITSA deadline is an important milestone, but a proactive approach can help you to ensure that it passes without consequence.

We can support sole traders and landlords affected by MTD ITSA to keep accurate records, and to establish reliable and robust systems and processes, with the aim of making the transition to digital record-keeping and reporting far smoother.

To talk to one of our advisers about your concerns surrounding MTD ITSA, or if you need help to kick-start your preparations ahead of the first quarterly submission deadline, please contact us.