MTD ITSA delay: More power for the pilotby
Paul Aplin is relieved that MTD ITSA has been postponed again, but HMRC, software developers and the accountancy profession need to use the extra time well.
In my last article I expressed concern about the timescale for MTD ITSA. Given the restrictions on who could join the pilot programme, there simply wasn’t enough time.
The proposed changes to basis period rules would have exacerbated the problem, creating a huge peak in 2023 and straining agents’ capacity to provide the effective training and support that many clients would need.
I was therefore relieved to see the announcement by the new financial secretary to the Treasury, the Rt Hon Lucy Frazer QC MP that the start date for MTD ITSA will move back a year. The move recognises the extraordinary pressures that people, the economy and the tax system have faced in the pandemic.
The start date for MTD for ITSA is now to be April 2024 (April 2025 for general partnerships and further out, to a date yet to be announced, for other partnerships).
The new late filing and late payment penalty regimes will also be deferred for a year to 2024 for those who are mandated to use MTD ITSA, and to April 2025 for all other ITSA taxpayers. Also, the proposed changes to the basis period rules will not come into effect before April 2024, with a transition year not earlier than 2023.
But this is only a deferral: The “entry point” is still turnover or rental income exceeding £10,000 and there has been no change to the core requirements to provide quarterly reports or to keep digital records.
I suspect there will be a huge sigh of relief from all who are going to be affected by MTD ITSA. It is far more important to deliver MTD effectively than to deliver it fast.
Regulations, costs and benefits
The MTD Regulations (also published on 23 September) will allow businesses, agents and software suppliers to plan.
Alongside the regulations a policy paper was published containing HMRC’s current assessment of costs and benefits. A second paper looks in more detail at the costs and benefits, which will vary according to business size, complexity and current degree of digitalisation.
We now have breathing space. I said at the end of my last article: “the tight restrictions on who can join the pilot need to be relaxed very soon if numbers are to build to the level we need to see ahead – preferably well ahead – of mandation and it is only when numbers in the pilot build that we – businesses, agents, software developers and HMRC – will gain the data and experience needed to successfully deliver the programme. It can only be delivered by a joint effort.”
I believe that is still true.
The next step, I would suggest, is a roadmap setting out which groups will be able to join the pilot and when. That roadmap should be agreed between HMRC, representative bodies and the software developers. Inevitably some of the staging will change as the project progresses, but at least there would be a shared framework to work to.
MTD ITSA will be a far more complex undertaking than MTD for VAT. A shared plan would enable HMRC to proceed and software developers to design with confidence, learning – as inevitably we all will – from experience as the pilot expands.
It would also enable businesses to plan and to seek training and support from their advisers if they need to and enable advisers to spread training and support so that it is effective.
The extra time also creates more opportunity to incorporate prompts and nudges – for example to reflect the new late filing and late payment regimes – into MTD.
In short, we have a very welcome breathing space – but we need to start using it straight away.
Paul Aplin will be speaking about MTD at AccountingWEB Live Expo on 1-2 December 2021 alongside such guests as Rebecca Benneyworth, Peter Rayney, Anita Monteith, Carl Reader, Steve Collings, Reza Hooda plus representatives from HMRC.
AccountingWEB Live Expo takes place on 1-2 December 2021 at Coventry Building Society Arena, Coventry. Registration is now open. A full content programme will be announced in early October enabling you to register for specific sessions. Please visit the AccountingWEB Live Expo website for full details and to sign up to our newsletter.
You might also be interested in
Paul Aplin was for many years a tax partner with an independent West Country firm. He is a past president of ICAEW, a former Chair of the ICAEW Tax Faculty, a member of CIOT Council and the Tax Technology Committee of CFE. He is a non-executive director of three companies, a member of HMRC’s Admin Burdens Advisory Board and the OTS Board....