Income tax pilot companies have to file manual returns for coronavirus grants

Businesses participating in the Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) Pilot are being advised they cannot make a digital return if they have claimed certain Covid-19 support grants>

This includes:

  • Self-Employment Income Support Scheme
  • Coronavirus Job Retention Scheme

These grants are taxable in 2020/21 and HMRC says they must be returned separately in a new box in the Self-Employment schedule. This requires a tax return to be submitted via the existing Self-Assessment process, rendering digital filing impractical. 

HMRC is contacting businesses participating in MTD ITSA to make them aware of the situation.

HMRC comments:

“Subject to any change in circumstances, future tax years will be unaffected, and we look forward to welcoming these businesses back into the MTD ITSA service at that point.

Tax expert and AAT past-president Brian Palmer comments:

“This is unfortunate for the small number of filers involved in the pilot. But it is perfectly understandable that this early on the roll out the MTD-ITSA pilot the Department is not diverting resources to solving a minor problem not of its making. 

“In the short term it is far better for us all if HMRC devotes its resources to supporting the UK government in its fight against the coronavirus. However, it must use this occurrence to inform its future design thinking to ensure that MTD has the flexibility built in to adapt to future unforeseen challenges that require in year system changes.”

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David Nunn is Content Manager at AAT.

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