Tax Writer Taxwriter Ltd
Columnist
Share this content
Delayed
istock_Delayed_mrdoomits

MTD ITSA delayed to 2024

by

The government has delayed the start of MTD ITSA to 6 April 2024, with MTD for general partnerships postponed to 2025. The change to the tax year basis has also been delayed until at least April 2024.

23rd Sep 2021
Tax Writer Taxwriter Ltd
Columnist
Share this content

In a written statement to the House of Commons on 23 September 2021, it was announced that MTD for income tax self assessment (MTD ITSA) would be postponed yet again to April 2024. 

"We recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so. We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st Century” announced the new financial secretary Lucy Frazer. 

Long time coming

This is the latest in a series of delays and deferrals in the MTD programme, which was proposed by Chancellor George Osborne in late 2015. The MTD start date for small businesses was first planned to be in April 2018, then the focus switched to MTD for VAT. The MTD for income tax programme was to be delayed until lessons had been learnt from the VAT roll-out.

MTD for VAT commenced on time for most VAT registered businesses for VAT periods starting on and after 1 April 2019 but a number of “complex” entities had a deferred start date to 1 October 2019. A similar deferral is now in place for general partnerships (ie not LLPs, mixed or corporate partnerships), with those “ordinary partnerships” due to enter MTD ITSA from April 2025.

There is no indication of when other more complex partnerships will have to join MTD, and we don’t know if the MTD for corporation tax project will start as planned in 2026 or not.

What is the base year?

The turnover for mandation into the MTD ITSA regime remains at only £10,000 per year, much to disappointment of many who were lobbying for a much higher entry threshold.

As the turnover threshold must take into account the taxpayer’s income from all of their sole-trader businesses, plus their rental income, HMRC needs to pull together several figures from the taxpayer’s self assessment tax returns. Only when the tax return totals reach the £10,000 threshold will HMRC issue a notice to file under the MTD regulations.

If MTD ITSA was mandated from 6 April 2023, the turnover test would need to apply to the figures reported in the 2021/22 tax return, submitted by 31 January 2023, and possibly turnover reported in the 2021/22. Both of those years were affected by the pandemic which reduced turnover and rental income for many businesses and landlords.

Local authority grants for businesses liable for business rates would also increase business turnover for those periods. The SEISS grants should not have been included in business turnover, but some taxpayers have reported them as such, leading to HMRC having to make many corrections taxpayers’ self-assessments for 2020/21, and possibly also for 2021/22. 

As MTD ITSA will now start in April 2024 the base year for testing the MTD turnover threshold will be the tax year 2022/23. The turnover figures for that year should not be distorted by Covid-related grants, and hopefully will reflect normal trading beyond the pandemic for most businesses. 

Tax year basis

When the consultation on changing to the tax year basis of assessment was released in July 2021, doubts were raised on whether there was sufficient time to introduce such a fundamental change to tax law before the mandation of MTD ITSA.

It was apparent that HMRC wanted all unincorporated businesses to switch to the tax year basis before the introduction of MTD ITSA in 2023, but this would make 2022/23 the difficult transitional year.

For businesses with an accounting year end that doesn’t approximate to the tax year, more than 12 months of profits would be assessed in 2022/23. This would have a knock-on effect for a wide range of allowances and charges, including NIC, student loan repayments and capital allowances, to name a few. There was just not enough time to write amendments to regulations in all the areas affected before April 2022.    

What’s more using the tax year basis would bring forward the start of MTD ITSA for businesses with a 31 March year end, from 1 April 2024 to 6 April 2023 – which came as a big shock for many accountants and businesses.

The written statement from the new financial secretary to the Treasury, confirmed the change to the tax year basis will not come into effect before April 2024, with a transition year no earlier than 2023. The government will respond to the consultation on reforming basis periods “in due course” but the wording of this statement makes the change to the tax year basis look uncertain.

----------

Still confused around MTD? Register for one of our popular MTD Bootcamps at AccountingWEB Live Expo with Rebecca Benneyworth or attend one of our HMRC sessions. There are over 60 panels, workshops, seminars and lectures at AccountingWEB Live Expo this December, covering self assessment, the Autumn Budget and much more - many with CPD attached.

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.

Register now

Replies (105)

Please login or register to join the discussion.

By Michael Beaver
23rd Sep 2021 15:46

Thank god!!

Thanks (5)
Ivor Windybottom
By Ivor Windybottom
23rd Sep 2021 15:50

Maybe this will buy enough time to sort out the stoopid tax year date, as the OTS report said this need more time.... here's more time. Expect that will still be too difficult.

It would be nice if, say, 2024/25 could be a big transitional year for both basis periods and the tax year end itself, with MTD starting in 2025.

I can dream!

Thanks (4)
Replying to Ivor Windybottom:
By Michael Beaver
23rd Sep 2021 15:56

Right!

I hope this also gives enough time for the tax institutions to lobby the government to amend the implementation plan so that it progresses in stages, like auto enrolment did.

Thanks (2)
avatar
By kdbr
23rd Sep 2021 15:58

And breathe - another year before retiral becomes a viable option; another year to re-consider that daft turnover limit; another year to think about mandating from the VAT limit first.

Thanks (4)
Replying to kdbr:
avatar
By Hugo Fair
23rd Sep 2021 16:34

Another year to consider phased introduction - in reverse order to the current plan - so large partnerships first, then smaller ones, then large S-E, then ... before finally single property landlords.
The exact order doesn't matter other than it should be underpinned by logic such as those most likely to have in-house book-keepers, before those with 3rd-party ones, before those trying D-i-Y - and with existing integrated software, before those who have to buy it, before those relying on bridging software - and so on.

Thanks (15)
Replying to kdbr:
avatar
By AdamMurphy
23rd Sep 2021 16:41

By 2024 (and that's a big IF considering this policy was first announced in 2015....) I'm in a position to downsize a lot and take on a small part-time job and keep my business running with just a few hand-picked clients if I want. Thanks HMRC!

Thanks (8)
avatar
By philaccountant
23rd Sep 2021 16:55

Still no explanation as to how we as accountants are supposed to deal with the enormous extra workload that this new system will create.

The current system gives us the best part of 10 months after the tax year end to file a single return for every client. Now we will have hundreds of extra submissions to make each quarter and nearly all of them will fall in a single month - IN ADDITION to that single return.

It's absolutely daft and shows hat HMRC have no clue how this profession works. Likely going to end up with the accounting equivalent of the current lorry driver crisis.

Thanks (29)
Replying to philaccountant:
By ireallyshouldknowthisbut
24th Sep 2021 11:26

@Phil, if you look at the TIIN, apparently it wont take any extra time at all.

https://www.gov.uk/government/publications/customer-costs-and-benefits-f...

£6 per filing including VAT is all agents will be charging based on what looks like our £50+VAT charge out rates.

I only wish I was making this up, but it looks like HMRC have.

Thanks (9)
Replying to ireallyshouldknowthisbut:
avatar
By flightdeck
24th Sep 2021 11:08

Thanks for that link ireallyshouldknow. It is hilarious. I didn't know HMRC had diversified into writing comedies who knew they would have such a gift for it!

Thanks (1)
Replying to flightdeck:
By ireallyshouldknowthisbut
24th Sep 2021 11:30

it would be more hilarious if this rubbish data wasn't being used to justify this project.

Whilst it might be true that for a VAT registered business the ongoing costs would be minimal assuming the VAT quarters coincide with the filing deadlines (itself a massive logistical issue)

That is way off the mark for the smallest business where the digital dose is not the right medicine for getting tax bills right.

Thanks (3)
Replying to ireallyshouldknowthisbut:
avatar
By unclejoe
24th Sep 2021 12:04

Thank you for the link. I have read much of it and it really does seem wonderful all the benefits that will accrue to my small business once I have adopted it. And it will only take 4 hours of training time for me to be fully proficient Magnifico! So why not just let those who wish to take advantage of all these wonderful benefits do so, and let those of us who don't believe it continue with the current system, with some minor modification to the cash flow aspects for HMRC. Simples!

Thanks (2)
Replying to ireallyshouldknowthisbut:
avatar
By djames
25th Sep 2021 12:02

Wow, first time I've seen that. Somebody ought to be held accountable for mis-selling and the misleading facts in this report. But I don't think that applies to government bodies. They just make up their own alternative facts, hold a meaningless 'consultation period' (in which they take no notice of genuine facts) and then just plough ahead regardless with their Fuhrer's plan. They don't care, taxpayers pick up the bill if it all goes Pete Tong. In fact, taxpayers pick up the bill whichever way it goes. They have no accountability because they don't have a stake.

Thanks (2)
Replying to ireallyshouldknowthisbut:
avatar
By Jimess
26th Sep 2021 16:37

The ludicrously small accountancy costs is just laughable but have you also seen the estimates for the cost of a laptop? £200 VAT inclusive - that may have been possible in September 2020 when the survey was carried out but I have just been pricing up a new laptop and I cannot find one that has any decent operating capacity for less than £350 - and that price really is for the minimum operating specs - and of course with Windows 11 coming along in the next month or so, technology prices will be pushed even higher. Then there is the cost of basic operating software, presumably microsoft office and possibly adobe acrobat to enable the chosen bookkeeping software to run and report properly, before you even get to chose your bookkeeping software. If the client decides to go down the smartphone or tablet route then they are probably looking at a subscription basis that could cost them anything from £35-£40 per month upwards and probably having to pay a premium for Apple or Android enabled software. So HMRC are estimating an average £330 initial set up cost (presumably including said wonderful laptop and software that you can buy for £200 inclusive of VAT) and an additional £35 per year ongoing costs - well we may as well hang up our boots now. £35 in most cases would not even cover the ongoing software rentals plus the broadband/mobile internet costs, let alone accountancy costs.

Thanks (2)
avatar
By GHarr497688
23rd Sep 2021 17:44

I hope HMRC will read this and reflect on the opinions of Accounting web contributors.
I have met my local MP , written to HMRC and also spoken/met with the HMRC's Making Tax Digital Team. To date the feed back has been that digital tax will bring better record keeping , tax payable in real time and better business management. Aweb contributors say the records are worse , the tax payment work fine now and costs are increasing. I note HMRC are having meeting with the software house so can I request : HMRC listen to the Accountants. Software providers listen to Accountants and taxpayers lobby their MP . If this carries on as it is then we will be facing some major problems. Software can't replace human beings input , software can't think , software is as good as its users. Accountans have to train for years to understand one of the most complex tax systems in the world , they have to explain to laymen about very difficult issues all with very limited time available and limited costings. This will not work if it carries on....

Thanks (17)
Replying to GHarr497688:
avatar
By AdamMurphy
23rd Sep 2021 18:56

It really frustrates me that HMRC only meet the software developers. They need to meet with US, the people at the coal face.
Software developers will just tell HMRC what they want to hear, because they will make money from software sales.

Thanks (15)
Replying to AdamMurphy:
avatar
By GHarr497688
23rd Sep 2021 19:17

Couldn't agree more however if the software vendors carry on ignoring the Accountants MTD will come back and bite them once HMRC realise tax compliance has gone to the dogs. Just wait and see. The fun is just about to start.....

Thanks (2)
Replying to GHarr497688:
avatar
By djtax
24th Sep 2021 10:23

I recommend reading the New FST's statement which includes a few 'nuggets':

"MTD helps businesses reduce common errors in their tax affairs"
...see all the comments about that on a number of MTD threads here on AWeb!

"MTD users are reporting that preparing and submitting returns is easier"
....sorry not my experience of some microbusinesses who now have to pay me to do VAT Returns they used to do themselves.

"Over the past year, HMRC have worked closely with partners in the business and tax communities on the proposed design and scope of MTD for Income Tax (ITSA)"
.....LOL! They may have spoken to big firms and the software guys - but HMRC effective engagement with small practitioners is near zero - despite us handling small businesses who are numerically the largest group affected by MTD and the most likely to include those with limited IT skills.

And that fatuous old chestnut soundbite:
"...to become one of the most digitally advanced tax authorities in the world"

Thanks (5)
Replying to djtax:
avatar
By AdamMurphy
24th Sep 2021 10:29

They chose VERY carefully who they spoke to. People who would only tell them what they wanted to hear.

Thanks (7)
Replying to AdamMurphy:
avatar
By flightdeck
24th Sep 2021 11:09

Must have taken them ages to find the 3 positives among the 1000 negatives.

Thanks (5)
Replying to djtax:
avatar
By Richardrussell
24th Sep 2021 10:43

Absolutely agree, total spin

Thanks (5)
Replying to GHarr497688:
rebecca cave
By Rebecca Cave
24th Sep 2021 13:03

HMRC have read this, and I have just received a 'suggestion' from HMRC press office that I include some more positive lines around the reasons for the delayed start to 2024.

Thanks (6)
Replying to Rebecca Cave:
avatar
By johnjenkins
24th Sep 2021 13:20

PML. A positive line straight into the bin.

Thanks (2)
Replying to Rebecca Cave:
avatar
By GHarr497688
24th Sep 2021 13:53

When no commentators seem to be in favour of MTD would you not explain your commentators views to HMRC or perhaps even better ask them to contact me to explain why their flawed theory of utopia is just plain unworkable. As HMRC or the software houses are the people on the ground delivering the system is this the right approach to get the best results ? I am even more surprised and so shocked that HMRC are influencing what you are writing , how often does this happen ?

Thanks (5)
Replying to GHarr497688:
avatar
By Open all hours
24th Sep 2021 17:38

Once too often already. Blows what was left of HMRC’s credibility right out of the water

Thanks (2)
Replying to Rebecca Cave:
RLI
By lionofludesch
24th Sep 2021 13:45

Rebecca Cave wrote:

HMRC have read this, and I have just received a 'suggestion' from HMRC press office that I include some more positive lines around the reasons for the delayed start to 2024.

Positive?

Like what?

HMRC staff having more time to answer mail?

Thanks (1)
Replying to Rebecca Cave:
avatar
By djtax
24th Sep 2021 14:13

Intervention by a government department trying to influence how policy is reported - whatever happened to freedom of speech?

Thanks (3)
Replying to djtax:
avatar
By Open all hours
24th Sep 2021 17:40

Freedom and Truth were always going to be the first casualties of MTD. Time for those at the top of HMRC and the MTD project to consider their positions.

Thanks (0)
Replying to Rebecca Cave:
By ireallyshouldknowthisbut
24th Sep 2021 22:22

...double post

Thanks (0)
Replying to Rebecca Cave:
By ireallyshouldknowthisbut
24th Sep 2021 22:21

Rebecca Cave wrote:

HMRC have read this, and I have just received a 'suggestion' from HMRC press office that I include some more positive lines around the reasons for the delayed start to 2024.


Respect due to you for mentioning the clumsy attempt at censorship. They seem be fair bright enough to realise they are flogging an utterly pointless system, but without the guts to do anything about it.
Thanks (0)
Replying to Rebecca Cave:
Tornado
By Tornado
25th Sep 2021 13:21

Rebecca Cave wrote:

HMRC have read this, and I have just received a 'suggestion' from HMRC press office that I include some more positive lines around the reasons for the delayed start to 2024.

Can I suggest that a more positive reaction to the delayed start is that it significantly increases the chances of this never starting at all.

Thanks (0)
RLI
By lionofludesch
23rd Sep 2021 22:20

Eh - I needn't have retired !!

Thanks (4)
Replying to lionofludesch:
avatar
By memyself-eye
24th Sep 2021 09:01

Nor me!
Too late now though, guess I'll just have to pilot (sail? drive?) my boat to the local pub this afternoon....

Thanks (4)
avatar
By AnnAccountant
23rd Sep 2021 22:25

My plan is to give up the compliance work I do when this comes in as I don't need the hassle.

More recently, my plan is to work less in general. Especially with mounting inflation, the motivation to add more to savings feels risky - I think the inflation risk is probably better managed by working less even if that is for slightly longer.

In general, I know of a decent number of people across industries who are working less than in 2019 by choice - various situations, factors and reasonings - incl work being an unfun masked rulefest these days.

Plenty won't go back to their 2019 hours for a while, if ever - and by choice.
Same with me for my various reasons.
Maybe shortages and price rises will continue?

Thanks (3)
Replying to AnnAccountant:
RLI
By lionofludesch
23rd Sep 2021 22:37

More demand and less supply.

The perfect storm.

Thanks (4)
Replying to lionofludesch:
avatar
By Hugo Fair
23rd Sep 2021 23:56

Fine for those that already have - less so for those without.

Thanks (3)
Tornado
By Tornado
23rd Sep 2021 22:37

This is still a lost cause and a delay of one year will not make the slightest difference to the inherent problems of this ridiculous project. Scrapping it now is the best way to put it out of its misery.

RIP MTD, your days are numbered.

Thanks (18)
Replying to Tornado:
By SteveHa
24th Sep 2021 09:18

I wish I shared your optimism. HMRC's track record of abandoning ill conceived initiatives is not good. Just look at RTI, which still doesn't work.

Thanks (9)
Replying to Tornado:
avatar
By raju m
24th Sep 2021 09:51

spot on !!!!!!!!!!!!!!!!!!!!!!!!!!

Thanks (2)
Replying to Tornado:
avatar
By raju m
24th Sep 2021 09:51

spot on !!!!!!!!!!!!!!!!!!!!!!!!!!

Thanks (0)
avatar
By adrian1957
24th Sep 2021 09:17

Has anyone converted a trader who used incomplete records to a digital accounting system? 9 out of 10 have said to us how much easier it is to do their bookkeeping with a bank feed and we can do their accounts a few months after the year end as opposed to a month before deadline date. Haven’t we all used a digital system for payroll where we can batch 100s of payrolls in 10 minutes whereas it took us days to do the same? Taxes constantly change, why not accounting systems? MTD will always happen!!

Thanks (1)
Replying to adrian1957:
By SteveHa
24th Sep 2021 09:19

Possibly because UK tax legislation is far too complex for software to handle, and HMRC's handling of software is at best inept.

Thanks (11)
Replying to adrian1957:
avatar
By North East Accountant
24th Sep 2021 09:43

What payroll software are you using?

Thanks (0)
Replying to North East Accountant:
avatar
By adrian1957
28th Sep 2021 17:14

Brightpay

Thanks (0)
Replying to adrian1957:
RLI
By lionofludesch
24th Sep 2021 10:29

adrian1957 wrote:

Has anyone converted a trader who used incomplete records to a digital accounting system? 9 out of 10 have said to us how much easier it is to do their bookkeeping with a bank feed and we can do their accounts a few months after the year end as opposed to a month before deadline date. Haven’t we all used a digital system for payroll where we can batch 100s of payrolls in 10 minutes whereas it took us days to do the same? Taxes constantly change, why not accounting systems? MTD will always happen!!

Nothing stopping you doing that.

No need to drag everyone else with you.

I would've thought that it was easier to tell a new trader, young or old, how to keep books on software, rather than a trader who's been using a manual system for twenty, thirty, maybe forty years that this is now the way he must do things.

Thanks (6)
Replying to adrian1957:
By ireallyshouldknowthisbut
24th Sep 2021 10:51

@Adrian,

we have taken numerous clients from poor records to much more suitable records for them, and the benefits of digital in the past 20 odd years.

However we have also deliberately left many clients for whom cloud wont help on their existing systems which they know and understand and deliver timely data for their tax returns.

The key is the client and I have chosen the appropriate bookkeeping method.
it has not been imposed by the state
And nor has it been mandated we file it every quarter.

MTD is the equivalent of mandating everyone should learn to drive and drive everywhere, when some folks are getting by just fine on the push bike or walking. Their choice. Indeed I can drive, but often choose to cycle or walk. I do the same with my taxes, I use cloud for my business accounts, excel for my personal tax.
My wife keeps her records in a A4 folder which I annually type into the return in about 30 minutes tops. Why should HMRC mandate my wife learns to use software and file quarterly?

Thanks (20)
Replying to ireallyshouldknowthisbut:
avatar
By Paul Crowley
24th Sep 2021 11:41

Agree entirely
Always offer clients a quick my may of doing things
Some get all excited and create complicated Spreadsheets that just do not work
Others it is quicker to advise that annotating the bank statements is all that is needed
Most businesses that I deal with have no desire for management accounts, the bank balance does all they need
Paying for systems is just money down the drain

Thanks (7)
Replying to ireallyshouldknowthisbut:
avatar
By GHarr497688
24th Sep 2021 13:55

We are all saying the same so why are they ignoring us ?

Thanks (3)
Replying to ireallyshouldknowthisbut:
avatar
By adrian1957
28th Sep 2021 17:21

The client is indeed the key. With assistance from a proactive accountant showing them how easy it can be or that we can do the "heavy" work they usually see the benefits. If the agent has a negative view then this can sometimes put the taxpayer off. Some will need hand holding and some will try and apply for exemption. Don't forget some will need to be exempted as follows:
If it’s not reasonable or practical for you to use computers or the internet due to age, disability or location
If you object to using computers on religious grounds
If it’s not reasonable or practical for any other reason
Any of our clients who are not happy will be accommodated but i have found a very high percentage have welcomed the change and made their life much easier.

Thanks (0)
Replying to adrian1957:
avatar
By Jimess
26th Sep 2021 16:58

OK, so I have several landlord clients that have property income in excess of £10,000 - perhaps two or at most three properties. No other income other than pensions/PAYE. Once per year they give me a summary from their rental agents that shows me for each property 12 amounts of rent, 12 amounts of agents commission, 1 payment for insurance, 1 payment for gas/electric testing, and few and far between repairs payments - say half a dozen, if that, per year. I can put this straight on to the property pages in less than 10 minutes. How is keeping digital bookkeeping records going to benefit my retiree landlord clients in any way? They already know what rental income they are getting from the agent statements - they don't need a digital record keeping system to tell them what they already know. I appreciate that this is a very simplistic example, but it is one that I come across all too often these days as retirees put their money into property to produce a better return for their money. How is digital record keeping going to help these clients?

Thanks (6)
Replying to Jimess:
avatar
By djtax
27th Sep 2021 12:12

Rental agent statements with 12 months in a year? If only. The number of times I have seen rental agent statements with 11 or 13 months in a year...(OK due to cash basis which is now accepted though it still goes against the grain to have a year with other than 12 months!).

Thanks (0)

Pages