COMPLIANCE
Making tax digital for income tax self-assessment: where are we now?
Richard Hattersley, editor, AccountingWEB, gives an update on the latest twists in the making tax digital (MTD) for income tax self-assessment (ITSA) saga
M TD for ITSA has been dominating the accountancy headlines for over a decade. While a delay to the project will give AccountingWEB journalists plenty to write about over the next couple of years, the impact of the digital project will have longer lasting implications for everyone, including payroll professionals. The latest twist in the MTD story came in December last year, when the Treasury confirmed the much-rumoured two-year delay to its digital timetable. Following concerns raised from all corners of the accountancy profession about the readiness of the project itself, let alone the taxpaying public, the government moved the new start date for mandatory digital income tax filing to 6 April 2026. But that wasn’t all, the minimum income reporting level increased to £50,000 from the much maligned £10,000, and those earning more than £30,000 will join the scheme in 2027. Meanwhile, the situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses. The announcement came as a relief to some in the accountancy profession, who either voiced concern about the project or took the ‘wait and see’ approach, but it was equally met with despair by those who had invested in new technology and organised their clients ready for the original April 2024 deadline. Now MTD ITSA has been kicked into the long grass, the whole cycle of getting clients prepared and choosing software begins again. The story so far The spectre of MTD ITSA has been hanging
over the profession in some form or another since former chancellor, George Osborne announced the death of the tax return in the March 2015 budget. But the project hasn’t exactly gone to plan, as the latest delay suggests. While the value added tax (VAT) portion of MTD eventually becomes mandatory, there are still questions swirling around the roll-out of the ITSA, which is surely giving flashbacks to any payroll professional that lived through the launch of real time information reporting. Lots of unanswered questions On AccountingWEB, readers and commentators have questioned whether the gradual roll-out is too rushed, while others, including past president of the Institute of Chartered Accountants in England and Wales (ICAEW), Paul Aplin, have encouraged HM Revenue and Customs (HMRC) to expand the pilot. Writing on AccountingWEB late last year, Aplin said: “The limitations on entry to the pilot made an MTD deferral of some kind inevitable. The pilot will not (and cannot) gain any real momentum until it includes non-fiscal year-end businesses.” But going by the recent pause of the pilot for newcomers, there doesn’t seem to be a rush to scale up the scheme just yet. At the time of writing, there were only 137 businesses participating in the pilot. Accountants have questioned how taxpayers can claim exemption from MTD filing and why HMRC won’t be providing free software to taxpayers with the simplest affairs, to name just a few unanswered questions. Meanwhile, the delay has also given professional bodies and other stakeholders time to pick over the bones of the
project, with ICAEW highlighting that the “administrative burden associated with quarterly updates is disproportionate and needs a rethink”. HMRC’s digital plans But while the project and the pilot are currently in abeyance, the tax department’s digital ambitions are still very much active. For example, a recent consultation released during the tax administration and maintenance day blizzard, called for evidence on the use of third-party information, which could be seen as another step towards implementing MTD ITSA through pre-populating tax returns. But the impact of MTD touches more than just tax returns. HMRC’s ten-year strategy is predicated on extending ‘modern services’ to more taxpayers and agents, using the introduction of MTD as an example, alongside the increased use of digital channels. And as the recent ‘ Simplifying and modernising HMRC’s income tax services through the tax administration framework ’ paper explores, this push towards becoming ‘digital by default’ is seeing HMRC offer taxpayers more digital options, and in doing so, reducing contact by phone and post. Payroll professionals will already be aware that P11D and P11D(b) must now be submitted digitally. So, while the accountancy profession gears up for more warnings to get prepared for MTD (again) and potential revisions on whether MTD ITSA should be expanded to self-employed individuals and landlords under the £30,000 threshold, the fact is that the move to digital underpins HMRC’s strategy and it isn’t going anywhere. n
Hear more about MTD ITSA and the other burning issues affecting the accountancy profession and payroll professionals at AccountingWEB’s Live Expo on 13 - 14 March 2024 at Birmingham’s NEC. Go to https://ow.ly/Rkez50ORzXy to pre-register for your free ticket.
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| Professional in Payroll, Pensions and Reward |
Issue 92 | July - August 2023
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