The Income Tax (Digital Requirements) Regulations 2021

Prospective

PART 1 U.K. General

Citation and commencement U.K.

1.  These Regulations may be cited as the Income Tax (Digital Requirements) Regulations 2021 and come into force on 6th April 2024.

Commencement Information

I1 Reg. 1 in force at 6.4.2026 (as amended by S.I. 2024/167, reg. 3), see reg. 1

Interpretation U.K.

2.  In these Regulations—

“TMA 1970” means the Taxes Management Act 1970;

“Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

“designatory information” means information which enables HMRC to identify a relevant person, the type of business carried on by a relevant person, the commencement and cessation dates of the business or the basis used for calculating taxable profits for the purposes of income tax;

“digital records” has the meaning given by regulation 6;

“the digital requirements” has the meaning given by regulation 3(1);

“digital start date” has the meaning given by regulation 4;

“end of period information” means financial information(1) and other information in respect of the business of a relevant person for a relevant period(2);

“end of period notice” has the meaning given by regulation 12;

“HMRC” means Her Majesty’s Revenue and Customs;

“property business” has the same meaning as it has in section 263(6) of ITTOIA 2005(3);

“quarterly deadline” has the meaning given by regulation 7(5);

“quarterly period” has the meaning given by regulation 7;

“quarterly update” has the meaning given by regulation 7(2);

“relevant person” means a person to whom Schedule A1 applies by virtue of paragraph 1 or 2 of Schedule A1, other than a person to whom an exemption applies by virtue of Part 7 or 8 of these Regulations;

“retailer” has the same meaning as it does in Schedule 11 to the Value Added Tax Act 1994(4);

“retail sales notice” has the meaning given by regulation 16(1);

“Schedule A1” means Schedule A1 of TMA 1970;

“update information” means financial information and other information in respect of the business of a relevant person for a quarterly period;

“update notice” has the meaning given by regulation 8(1).

Commencement Information

I2 Reg. 2 in force at 6.4.2026 (as amended by S.I. 2024/167, reg. 3), see reg. 1

Use of functional compatible software U.K.

3.—(1) A relevant person must use functional compatible software to comply with the following requirements (“the digital requirements”)—

(a) to record digital records under Part 2;

(b) to preserve those digital records until the end of the relevant day as required by section 12B(1A)(b) of TMA 1970(5);

(c) to provide quarterly updates under Part 3; and

(d) to provide an end of period statement(6) under Part 4.

(2) Where a relevant person has received notice to file for a year of assessment under section 8 of TMA 1970 and is required to file an end of period statement for that tax year(7), that person may use functional compatible software to comply with the duty to file the things mentioned in subsection (1AB)(a) for that year(8).

(3) “Functional compatible software” means a software program or set of compatible software programs which comply with conditions set out in a software notice, where such notice has been made, and the functions of which include—

(a) recording and preserving digital records in a digital form;

(b) providing to HMRC quarterly updates and end of period statements and by using the API platform; and

(c) receiving information from HMRC using the API platform in relation to a relevant person’s compliance with obligations under these Regulations.

(4) “Software notice” means a general direction given by the Commissioners which is stated to be given further to this regulation and specifies conditions with which functional compatible software must comply.

(5) A software notice may specify different conditions for different cases or purposes.

(6) “API platform” means the application programming interface that enables electronic communication with HMRC, as specified by notice made by the Commissioners.

Commencement Information

I3 Reg. 3 in force at 6.4.2026 (as amended by S.I. 2024/167, reg. 3), see reg. 1

Digital start date U.K.

4.—(1) Where a relevant person is carrying on a business(9) immediately before 6th April 2023 the digital start date that applies to that business is 6th April 2024.

(2) Paragraphs (3) and (4) apply where a relevant person—

(a) commences carrying on a business on or after 6th April 2023; and

(b) is required to make or deliver a return under section 8 of TMA 1970 including information relating to that business.

(3) Where the exception in section 8(1G) of TMA 1970(10) applies to the return, the digital start date that applies to the business is 6th April in Year 4, where Year 1 is the year of assessment to which the return relates.

(4) In any other case, the digital start date that applies to the business is 6th April in Year 3, where Year 1 is the year of assessment to which the return relates.

Commencement Information

I4 Reg. 4 in force at 6.4.2026 (as amended by S.I. 2024/167, reg. 3), see reg. 1

(1)

For the meaning of “financial information” see paragraph 7(2) of Schedule A1.

(2)

“Relevant period” is defined in paragraph 8(2) of Schedule A1.

(3)

“ITTOIA 2005” is defined in section 118 of TMA 1970. That definition was inserted by paragraphs 357 and 380 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5).

(4)

1994 c. 23.

(5)

Section 12B was inserted by paragraph 3 of Schedule 19 to the Finance Act 1994 (c. 9). Section 12B(1A) was inserted by paragraphs 1 and 14 of Schedule 14 to the Finance (No. 2) Act 2017.

(6)

For the meaning of “end of period statement”, see paragraph 8 of Schedule A1.

(7)

Paragraph 8(6)(b) of Schedule A1 gives the meaning of an end of period statement ‘for’ a tax year.

(8)

Section 8 was substituted by section 90(1) and (5) of Finance Act 1990 (c. 29). Section 8(1AB) was inserted by paragraphs 1 and 3 of Schedule 14 to the Finance (No. 2) Act 2017. See also section 8(1AC)(b)(ii) of TMA 1970 and paragraph 9 of Schedule A1.

(9)

“Business” is defined in paragraph 6 of Schedule A1.

(10)

Section 8(1G) was inserted by section 88(4) of the Finance Act 2007 (c. 11) and amended by paragraph 3(10) of Schedule 14 to the Finance (No. 2) Act 2017.