The Income Tax (Digital Requirements) Regulations 2021

Made: at 9.22 a.m. on 23rd September 2021

Laid before the House of Commons: at 1.30 p.m. on 23rd September 2021

Coming into force: 6th April 2024

The Commissioners for Her Majesty’s Revenue and Customs make the following Regulations in exercise of the powers conferred by paragraphs 2(4), 7 to 9, 11, 13 to 15 and 18 of Schedule A1 to the Taxes Management Act 1970[^f00001].

PART 1 — General

Citation and commencement

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These Regulations may be cited as the Income Tax (Digital Requirements) Regulations 2021 and come into force on 6th April 2026.

Interpretation

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In these Regulations—

• “TMA 1970” means the Taxes Management Act 1970;

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

• ...

• “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;

• ...

• ...

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

• “property business” has the same meaning as it has in section 263(6) of ITTOIA 2005[^f00004];

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

• “quarterly update 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[^f00005];

• ...

• “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 update period;

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

Use of functional compatible software

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• (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[^f00006];

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

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (e) to provide corrections to digital records under Part 6.

• (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, that person may use functional compatible software to comply with the duty to file the things mentioned in subsection (1AB)(a) for that year[^f00009].

• (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 ... 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.

Digital start date

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• (1) Where a relevant person is carrying on a business[^f00010] immediately before 6th April 2025 the digital start date that applies to that business is 6th April 2026.

• (2) Paragraph (5) applies where a relevant person—

• (a) commences carrying on a business on or after 6th April 2025; and

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

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) The digital start date that applies to the business is 6th April in the year of assessment following the year of assessment in which the person was required to deliver the return.

PART 2 — Digital records

Keeping and recording digital records

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• (1) A relevant person must keep digital records for each business for the period beginning with the digital start date which applies to the business and ending with the date on which the business ceases.

• (2) A relevant person must record a digital record by no later than—

• (a) the quarterly deadline for the quarterly update period in which the digital record falls; or

• (b) immediately before the relevant person provides the quarterly update for the quarterly update period in which the digital record falls,

whichever is the earlier.

Digital records

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• (1) Subject to paragraph (3), “digital records” for a business means records of—

• (a) the financial information included in update information,

• (b) the details of the items comprised in that financial information,

• (c) the amounts of those items and dates on which those items were received or incurred, and

• (d) such other information as the Commissioners consider relevant to ascertaining update information as may be specified by a notice made by the Commissioners which is stated to be made further to this regulation.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) In respect of the retail sales of the business of a retailer, a relevant person may keep such digital records as may be specified by a notice made by the Commissioners which is stated to be made further to this paragraph.

PART 3 — Quarterly updates

Quarterly updates

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• (1) A relevant person must provide to HMRC update information for a business, as specified in an update notice, in respect of each quarterly update period for each tax year.

• (2) “Quarterly update” means the provision of information required by paragraph (1).

• (3) Subject to paragraphs (8), (9) and (10) and regulation 9(1A), the quarterly update periods for a tax year are those specified in the following table.

	Period
Quarterly update period 1	The period beginning with the first day of the tax year (6th April) and ending with the following 5th July
Quarterly update period 2	The period beginning with the first day of the tax year (6th April) and ending with the following 5th October
Quarterly update period 3	The period beginning with the first day of the tax year (6th April) and ending with the following 5th January
Quarterly update period 4	The period beginning with the first day of the tax year (6th April) and ending with the following 5th April

• (4) Each quarterly update must be provided by no later than the quarterly deadline.

• (5) The quarterly deadlines for each quarterly update period are the dates specified in the following table.

	Deadline
Quarterly update period 1	7th August following the end of quarterly update period 1
Quarterly update period 2	7th November following the end of quarterly update period 2
Quarterly update period 3	7th February following the end of quarterly update period 3
Quarterly update period 4	7th May following the end of quarterly update period 4

• (6) A relevant person may make an election under this paragraph for a business in respect of a tax year (“a calendar quarters election”).

• (7) A calendar quarters election has effect for the tax year in respect of which it is made and for subsequent tax years until it is withdrawn.

• (8) Subject to paragraph (9) and regulation 9(1A), where a calendar quarters election has effect for a tax year, the quarterly update periods for that tax year are those specified in the following table.

	Period
Quarterly update period 1	The period beginning with 1st April before the beginning of the tax year and ending with the following 30th June
Quarterly update period 2	The period beginning with 1st April before the beginning of the tax year and ending with the following 30th September
Quarterly update period 3	The period beginning with 1st April before the beginning of the tax year and ending with the following 31st December
Quarterly update period 4	The period beginning with 1st April before the beginning of the tax year and ending with the following 31st March

• (9) For the first tax year for which a calendar quarters election has effect, each quarterly update period begins with the first day of the tax year (6th April) and ends on the date specified for that quarterly update period in the table in paragraph (8).

• (10) For the tax year following the final tax year for which a calendar quarters election has effect, each quarterly update period begins with the 1st April before the beginning of the tax year and ends on the date specified for that quarterly update period in the table in paragraph (3).

• (11) A calendar quarters election must be made by notice to HMRC before the relevant person provides any update information in relation to the first quarterly update in respect of a quarterly update period for the tax year in respect of which the election is made.

• (12) A calendar quarters election may be withdrawn by notice to HMRC at any time.

• (13) Where a calendar quarters election is withdrawn, it ceases to have effect—

• (a) at the beginning of the tax year in which it is withdrawn, where the withdrawal is made before any update information has been provided for that year; and

• (b) immediately after the end of the tax year in which it is withdrawn, in all other cases.

Update notices

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• (1) “Update notice” means a notice made by the Commissioners which is stated to be made further to this regulation and which specifies update information to be provided to HMRC.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) For different descriptions of relevant person, different update information may be specified.

Commencement and cessation of the requirement to provide quarterly updates

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• (1) For the purposes of regulation 7(1), the first quarterly update period for a business is the period beginning on the digital start date which applies to the business.

• (1A) Where a person ceases to carry on a business, the quarterly update period ends on the date of the cessation.

• (2) A final quarterly update for the business is required for the quarterly update period during which the business ceases to be carried on.

• (3) Where paragraph (2) applies, the relevant person must give notice of the cessation, and the date of the cessation, to HMRC on or before the quarterly deadline for the final quarterly update period.

Early provision of update information for quarterly update periods

10

• (1) Subject to paragraph (2), a relevant person may provide update information as specified in an update notice for the whole of a quarterly update period before the end of that period.

• (2) A relevant person may do so only if—

• (a) the update information is provided by a date (“the provision date”) which is within 10 days before the end of the quarterly update period;

• (b) when providing the update information, the relevant person confirms that the update information covers the whole of quarterly update period; and

• (c) the relevant person reasonably expects that no update information will arise in respect of the period commencing with the provision date and ending with the end of the quarterly update period.

PART 4 — End of period statements

Provision of end of period statements

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

End of period notices

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specified information

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Commencement and cessation of requirement to provide end of period statements

14

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PART 5 — Retail sales of retailers

Retailers – elections

15

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Digital records in relation to retail sales

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 6 — Corrections and omissions

Digital records – corrections and omissions

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• (1) Where a relevant person discovers an error or omission in their digital records, the relevant person must correct the digital records as soon as possible.

• (2) Paragraph (3) applies where—

• (a) in consequence of such an error or omission a quarterly update is provided to HMRC which contains incorrect or incomplete information; and

• (b) the final quarterly update has not been provided for the relevant period to which the quarterly update applies.

• (3) The relevant person must provide the correct or complete information to HMRC when the relevant person next provides—

• (a) a quarterly update ...

End of period statements – amendment by relevant persons

18

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

End of period statements – corrections by HMRC

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PART 7 — Digital exclusion exemption

Exemption for the digitally excluded

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• (1) The digital requirements do not apply to a person for a tax year if—

• (a) at the time any of those requirements would otherwise apply the person is digitally excluded[^f00014];

• (b) the person gives notice to HMRC that the person is digitally excluded; and

• (c) the Commissioners confirm they are satisfied that the person is digitally excluded.

• (2) A notice under paragraph (1)(b) must—

• (a) specify how the digital exclusion condition is met in relation to the person; and

• (b) specify the date from which the digital exclusion condition is met and, if the person has since ceased to be digitally excluded, the date on which the condition ceased to be met.

• (3) On receipt of a notice under paragraph (1)(b), the Commissioners must give a notice that either they are or are not satisfied that the person is digitally excluded.

• (4) A notice by the Commissioners under paragraph (3) must be given within 28 days of receiving the notice under paragraph (1)(b).

• (5) Where—

• (a) the Commissioners have given notice that they are satisfied that a person is digitally excluded; and

• (b) the person then ceases to be digitally excluded,

the person must give notice of so ceasing to HMRC within 3 months of the person ceasing to be digitally excluded.

• (6) A notice under paragraph (5) must specify the date on which the person ceased to be digitally excluded.

• (7) If the Commissioners cease to be satisfied that a person is digitally excluded they must give notice to the person that they have ceased to be so satisfied.

• (8) A notice under paragraph (7) must specify the date on which the Commissioners ceased to be satisfied that the person was digitally excluded.

• (9) If a person ceases to be digitally excluded, the digital requirements apply in respect of the tax year following that in which the person ceased to be digitally excluded and to subsequent tax years.

PART 8 — Other exemptions

Income exemption

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• (1) The digital requirements do not apply to a person for a tax year to which the exemption in this regulation applies.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) The exemption applies—

• (a) for the tax year 2026-27, if the amount of the person’s qualifying income for the tax year 2024-25 is not more than £50,000, and

• (b) for subsequent tax years, if the amount of the person’s qualifying income for the most recent tax year in relation to which the filing deadline fell before the start of the tax year in question is not more than £30,000.

• (4) The filing deadline in relation to a tax year is the date on or before which the person is required to comply with a notice to file under section 8 of TMA 1970.

• (5) A person’s qualifying income for a tax year is the sum of the amounts of income ... which, for each business carried on by the person in that tax year, are included in that person’s return under section 8 of TMA 1970 for that tax year[^f00015].

• (5A) But a person’s qualifying income for a tax year does not include any qualifying care receipts for that tax year.

• (5B) For the purpose of paragraph (5), the amount of income for each business is—

• (a) the amount included in the return before any deductions, or

• (b) if a person is not required to include in the return the amount of income before any deductions, the amount included in the return after deductions.

• (5C) For the purposes of determining a person’s qualifying income for a tax year, no account will be taken of any amendment to that person’s return for that year if—

• (a) it would increase that person’s qualifying income for that year, and