Who is likely to be affected

These amendments will affect individuals and businesses (such as tax agents who provide self-assessment taxpayer services) submitting information contained in regulation 2(1) of The Income and Corporation Taxes (Electronic Communications) Regulations 2003 (‘the 2003 regulations’) to HMRC electronically.

General description of the measure

This amendment will remove a risk that an insignificant error made during the delivery of information sent electronically to HMRC could invalidate the delivery of that information. The amendment ensures that the significance of, and reasons for, any failure to satisfy the conditions applying to electronic delivery will be considered in assessing the validity of an electronic delivery. Additionally, the amendment expands the scope of the 2003 regulations to include the new regime of Income Tax Self Assessment penalties issued under Finance Act 2021 to maintain taxpayer access to a digital function they are currently able to utilise to receive penalty notices digitally.

Policy objective

This is a technical change to ensure the 2003 regulations work in the way they were intended. The amended legislation applies a more flexible approach to deciding whether the conditions for electronic delivery of information have been satisfied. This means that, in this respect, the 2003 regulations will operate in the same way for Income Tax returns and other information contained in regulation 2(1) as they do for company tax returns. This will also ensure that regulatory safeguards designed to protect taxpayers who use an agent to deliver a Income Tax Self Assessment tax return work effectively.

Inclusion of the new regime of Income Tax Self Assessment penalties will ensure the 2003 regulations will continue to operate as intended when the new penalty regime ‘penalty reform’ is introduced.

Background to the measure

Without this amendment, the 2003 regulations presented a risk that a single technical and insignificant error in complying with the conditions for electronic delivery of an Income Tax Self Assessment return, or other information mentioned in regulation 2(1) of the 2003 regulations, could invalidate the delivery. This differed from the treatment applied to company tax returns, where the 2003 regulations had regard to the significance of any technical failures, and the reasons for them, rather than automatically invalidating a delivery for a single technical failure.

Additionally, as part of HMRC’s Making Tax Digital programme a new penalty regime ‘penalty reform’ is being introduced in tranches to the Income Tax Self Assessment population. To enable Income Tax Self Assessment customers to continue receiving electronic penalty communications once penalty reform is commenced the scope of the 2003 regulations must be expanded. This amendment brings the penalty reform legislation into to scope, ensuring continuity of customer access to this digital capability.

Detailed proposal

Operative date

These amendments will take effect from 11 March 2025.  

Current law

Powers set out in section 132 of the Finance Act 1999 and section 135 of the Finance Act 2002 allow HMRC to make, and amend, secondary legislation in connection with the use of electronic communications.

Proposed revisions

This instrument amends the 2003 regulations, replacing old regulations 3(8) and (9) with new regulations 3(7A) to (7C).

These new provisions apply where a person uses electronic communications to deliver information to HMRC. They prescribe when the relevant conditions (the conditions which the person must satisfy in order to use electronic communications to make the delivery) are taken to be satisfied. They apply to, and make the same provision in respect of, deliveries of information falling within regulation 2(1) of the 2003 regulations and deliveries of company tax returns and related information. Prior to this amendment, these 2 categories of information were treated differently.

New regulation 3(7B) provides that the relevant conditions will be treated as satisfied where HMRC is satisfied that the person’s failure to satisfy them is either insignificant or the result of a reasonable attempt to make a timely delivery. 

New regulation 3(7C) defines ‘extra time’, a concept used in regulation 3(7B)(b), covering various ways in which a person making a delivery might be given, or treated as having, extra time in which to do so. This instrument does not itself give HMRC any additional power to extend time in relation to any matter.

This instrument makes consequential amendments to regulations 1 and 5 of the 2003 regulations to reflect the replacement of old regulations 3(8) and (9) by new regulations 3(7A) to (7C).

This instrument also makes a separate amendment to the 2003 regulations in connection with the penalty reform legislation in the Finance Act 2021. It amends regulation 2(1) (which defines the scope of the 2003 regulations) so that this now includes any information delivered pursuant to paragraphs 6, 8 and 16 of Schedule 24, paragraphs 12 and 13 of Schedule 25, and paragraphs 7, 9, 16 and 17 of Schedule 26, to the Finance Act 2021 (except in relation to value added tax). This is to ensure that consent-based electronic communications can continue to be issued to Income Tax Self Assessment taxpayers in connection with penalties under the penalty reform legislation.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
nil	nil	nil	nil	nil	nil

This measure is not expected to have an exchequer impact.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households, and families

This measure will have no impact on individuals as it does not change their obligations, and existing processes will remain the same. The measure is expected overall to improve the experience of dealing with HMRC for individuals who submit Income Tax Self Assessment returns as the changes to legislation will improve the reliability of statutory protections and increase the likelihood of successful delivery of electronic information contained in regulation 2(1) of the 2003 regulations.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on those in groups sharing protected characteristics.

Impact on business including civil society organisations

This measure will have a negligible impact on businesses. One-off costs for businesses such as tax agents that provide self-assessment taxpayer services could include familiarising themselves with the amended 2003 regulations. However, it does not change their obligations. The measure is expected overall to improve business’ experience of dealing with HMRC by increasing the likelihood of successful delivery of electronic information contained in regulation 2(1) of the 2003 regulations.

This measure is not expected to impact civil society organisations.

Operational impact (£ million) (HMRC or other)

There should be no negative operational impacts from the proposed amendments. This is a legislative amendment, which will increase safeguards for the taxpayer and HMRC. It is not anticipated that existing processes will be impacted as a result of this legislative change.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measures will be kept under review through communication with affected taxpayer groups.

Further advice

If you have any questions about this change, please contact Laura Maddison, Tax Administration by telephone 0300 058 1023 or email Laura.Maddison@hmrc.gov.uk or contact Holly Mennell, Tax Administration by telephone 0300 054 1396 or email Holly.Mennell@hmrc.gov.uk regarding penalty reform.

Declaration

James Murray MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.