MTD for ITSA, how much does HMRC have to do in order to deliver MTD on time?

In evidence submitted to the Public Accounts Committee’s Progress with Making Tax Digital inquiry, contributors from across the accounting profession handed down a blistering verdict on the project, and HMRC’s ability to deliver on its new timeline.

The written submissions criticised HMRC’s failure to consult with and listen to taxpayers, agents, professional bodies and software vendors, spoke of the Revenue’s ‘limited understanding’ of how businesses operate, and expressed frustration at a lack of clarity over how MTD would work in practice.

The tax digitisation project’s current timetable will see it deliver Making Tax Digital for income tax self assessment (MTD ITSA) eight years behind schedule, and a recent National Audit Office paper reported that the scheme will come in more than £1bn over budget.

However, HMRC officials told MPs they were confident about the prospect of delivering MTD ITSA to its new timelines – those with incomes above £50,000 will join the programme in 2026, the £30,000 to £50,000 bracket will join in 2027, while quarterly reporting for incomes between £10,000 and £30,000 is under review.

Yet the Association of Tax Technicians (ATT) said there remains “an enormous amount of work to do” to deliver MTD in a workable and valuable form by 2026.

With a project this wide-ranging and complex, there were always going to be problems the project’s architects needed to tackle. However, the following stumbling blocks have yet to be satisfactorily resolved:

● The treatment of jointly owned properties
● Accommodating taxpayers with multiple agents
● Providing a coherent definition of what a digital record should look like
● The frequency of updates and whether these can be made cumulative
● The interaction of the MTD reporting period with basis period reform

HMRC officials told MPs that since December 2022 it has been undertaking a series of ‘co-creation’ events involving unnamed stakeholders “with the ambition of resolving the most pressing design issues within the coming months”.

If you would like to talk to us about MTD for ITSA contact us on 020 3697 7147. Or you can visit our web chat in the bottom right corner which is manned during office ours and you can leave a message out of hours.

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