HMRC to limit early ITSA applicants

22nd Sep 2019
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HMRC will soon stop some taxpayers from applying to joing Making Tax Digital for Income Tax Self Assessment.

It is well known that MTD ITSA (Making Tax Digital for Income Tax Self Assessment) is limited for those taxpayers that have only one self employment and no foreign income.  However, they have not yet prevented  taxpayers whose income is more complex from joining MTD.

One challenge of ITSA is that the MTD system does not feed all of the information currently on the SA1xx series of forms into their back office systems.  Hence tax payers who have more complex tax arrangements still need to supply additional information via a self assessment return.

It is, of course, difficult to be certain as to what income a taxpayer will receive during a tax year at the start of the year as a taxpayers whose income is entirely UK based may change.

However, HMRC sensibly do not want people to join MTD who will still have to provide an additional tax return at the end of the year.  They will soon (expected 1st October 2019) change their systems so that tax payers who have income in incompatible datasets in a previous year will be prevented from joining MTD when they apply.

This is an entirely rational and sensible approach which only causes problems for accountants, book keepers an other agents who wish to have a guinea pig taxpayer that they use to learn how MTD ITSA works.  For those people it will be harder to get such an account set up for the beta test processes.

John Hemming CEO of Cirrostratus said, "This is a very sensible approach from HMRC, but if a firm of accountants, bookkeeper or other agents wishes to learn how MTD ITSA works they would be best advised to get in an early application otherwise they may find their application gets refused.   MTD ITSA involves some material changes which it is worth learning about through doing."

His view is that the value to a firm of accountants who deal with hundreds of self assessment returns of learning how MTD ITSA works at a detailed level is worth the nuisance of sorting out any discrepancies on a single individual return at the end of the final deadline.

"Many of the problems," he said, "that accountants and other agents have had with VAT, occured because they have tried to handle of their clients' returns at once rather than having a tame guinea pig which enables them to learn how this works.    MTD ITSA does involve more changes than MTD VAT, it is, therefore, worth learning how to do this and the best way is via doing."