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.

Replying to djtax:
avatar
By Jimess
27th Sep 2021 12:48

I also get the monthly reports so I can do a quick reconciliation of the figures on the annual statements, not usually far wrong though.

Thanks (0)
Replying to Jimess:
avatar
By Ian McTernan CTA
27th Sep 2021 16:19

Biggest issue is going to be mortgage repayments- imagine having to exclude 50 of them a month and then working out the right amounts (ie the interest element).
One payment for insurance? More like 12, standing orders for gas, electric, other services provided to tenants such as broadband, common area costs for flats, service charges, etc.
And many don't use agents or the agents reports are rubbish.
Trying to go from client bank statements- oh wait, those small landlords don't use a separate bank account so what fun sorting that bank link out and excluding other income and personal expenses.

So it's a lot worse than than your simple example for many!

Oh and chuck in Section 24 to make them pay more tax than they have net income and Labour now threatening to tax them even more...

Thanks (1)
Replying to Ian McTernan CTA:
avatar
By Jimess
28th Sep 2021 11:18

I appreciate that not all landlords are as simplistic as my examples, the basis for my examples came from husband and wife retirees who rent out their former trading premises, and that is literally all the accounting they have as the tenants are responsible for the interior upkeep and running costs of the premises. I appreciate that if you have clients, as I do, that own say a block of flats with communal areas etc etc to maintain that is a different kettle of fish accounting wise. I would say that displays much more of a business intention than a retiree renting out former trading premises to supplement their income, or retirees buying a couple of rental properties to supplement their pension income, who then push it out to a rental agent and do not have a great deal more involvement than receipt of the passive net income it generates.

Thanks (0)
Replying to Jimess:
avatar
By adrian1957
28th Sep 2021 17:24

Same here, its like using a sledge hammer to crack a nut! What we are attempting to do is use a free digital package for them and just insert the figures quarterly from the agent and check them at the end of the tax year. Should still be quick and easy without much extra cost to the client.

Thanks (0)
Replying to adrian1957:
avatar
By Jimess
28th Sep 2021 19:37

It would have to be free software for such clients, but you are perhaps missing the point that instead of spending say ten minutes once a year entering the rental income information, it will need to be, probably the same amount of time 4 times per year by the time you have chased the client/rental agent for the paperwork each quarter and processed the figures, plus the end of year reconciliation. That is going to be extra work whichever way you try to spin it.

Thanks (0)
avatar
By adrian1957
24th Sep 2021 09:18

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 (0)
Replying to adrian1957:
avatar
By raybackler
24th Sep 2021 10:09

Yes, but you are missing the point. The MTD for ITSA requires extracts from the accounting system five times a year. Accountants carry out many adjustments to produce accounts once per annum for what will be the fifth submission. The other four quarterly submissions won't have these adjustments and will be nonsense. This problem would exists with manual or spreadsheet records too. Clients are not going to adjust capital allowances, prepayments, accruals, depreciation, asset disposals, VAT adjustments for the various schemes and correct bookkeeping errors.

Thanks (9)
Replying to adrian1957:
avatar
By Ian McTernan CTA
27th Sep 2021 16:36

You sound like someone paid by HMRC to push an agenda.

Your '9 out of 10' is completely made up figure.

'bank feed' doesn't give all the information, especially from a trader: you need their credit card statements and receipts for any cash purchases plus check their invoices against receipts into that bank feed- and you might need their personal bank statements too to review other business expenses...unless you're not doing a proper job.

And I'd love to know what payroll system you use to run 100's of payrolls in ten minutes.....or better yet, seeing as each one takes you less than 6 seconds tell me your charge out rate and you can take over all mine and charge me 6 seconds for each one.

And also, having incomplete records has no bearing on when you can do the accounts, just as easy to do them a few months after the year end.

What is easier with a bank feed is a business that only uses one bank account with all business expenses and income going through it and then I prepare the quarterly VAT return having first processed all the entries myself. Much faster than letting most clients 'BOSS' their accounts as it takes longer to correct all the errors than to do it from scratch myself. Some clients can do it but they have been trained by me 'when in doubt, ask my accountant', rather than input rubbish.

Thanks (2)
Replying to Ian McTernan CTA:
avatar
By adrian1957
28th Sep 2021 17:41

Not really trying to push the agenda, just trying to get all my clients onboard before the deadline day as if we leave it until a few months before we would not cope. I should be retired by the time is starts (Hurrah!) but my younger colleagues are enjoying the process and enjoy assisting the clients who have made the transformation especially the VAT registered clients.
The bank feed also includes credit cards and we tell the clients to try and stop using cash to pay for goods, even if it is a few pounds as with the debit card, mobile phone or watch it is much easier to use than going to the bank to get cash out. They take a photo of the receipt and then "bin" it. Our young clients have been using this system for years.
I think also if you research some payroll companies the payrolls can be batched if the wages are the same month after month and be submitted all together. Not all can be batched so obviously they will take longer to process. I remember when I used to complete the wages sheets that were about 6 foot long! Thank goodness for technology!
I don't think any of us are going to change HMRC's charge for MTD and so we have to work with them for the ultimate benefit of our clients. Is there anyone out there who is getting onboard?

Thanks (0)
Replying to adrian1957:
avatar
By johnjenkins
29th Sep 2021 09:47

There isn't any transformation for the VAT registered as they already submit quarterly figures (but some not for accounting purposes just vat purposes). Just watch what happens when they have to put everything together.
Of course the youngsters are enjoying it, they have been brought up with technology. The older generation who concentrate on their work and leave it to us once a year will not have the same advantage.
My gut feeling is that HMRC will pull the plug on quarterly updates for the small self-employed because the premise on which they based it on has been proven to be fictitious.

Thanks (0)
avatar
By lordburnside
24th Sep 2021 09:44

There is a God!

Thanks (1)
avatar
By lordburnside
24th Sep 2021 09:44

There is a God!

Thanks (1)
Replying to lordburnside:
avatar
By johnjenkins
24th Sep 2021 09:47

So now there's two Gods or have you got hiccups.

Thanks (2)
avatar
By johnjenkins
24th Sep 2021 09:46

HMRC are talking to the software houses. Does that mean IR35 is dead and buried? Does that mean the system can't cope with quarterly updates?
Or does it mean that HMRC have cocked it all up and have been given a year to sort it all out or MTD will be severely curtailed?
"Building a tax system fit for the 21st century". Perhaps that should read 22nd century.

Thanks (2)
Chris Caspell CTA TEP
By ccaspell
24th Sep 2021 09:47

It's interesting that at Accountex North on Monday HMRC and all the software providers were adamant that it would start in 2023. I wonder if this u-turn came as a shock to them.

Thanks (2)
Replying to ccaspell:
avatar
By johnjenkins
24th Sep 2021 09:53

You don't think someone with a bit of common sense is now running the show do you?

Thanks (1)
Replying to johnjenkins:
RLI
By lionofludesch
24th Sep 2021 10:30

johnjenkins wrote:

You don't think someone with a bit of common sense is now running the show do you?

No.

Thanks (4)
Replying to ccaspell:
avatar
By AdamMurphy
24th Sep 2021 18:47

When you've got pound signs in front of your eyes, you can't see what's coming.

Thanks (0)
avatar
By kbrajput
24th Sep 2021 09:54

Thank you Rebecca for update.

Where do we stand for MTD for VAT client for compliance from 01 April 2022?

Regards
Kamlesh

Thanks (0)
Replying to kbrajput:
rebecca cave
By Rebecca Cave
24th Sep 2021 13:08

MTD for VAT has not changed, all remaining VAT registered businesses must use the MTD for VAT regime from the first VAT period that starts on or after 1 April 2022.
There is a DIFFERENT and quite separate MTD regime for each tax.

Thanks (0)
David Ross
By davidross
24th Sep 2021 10:03

How is this good news?

Another case of HMRC crying wolf and leaving to swing those who have, at their own expense, prepared for change. A past example was the announcement that they would toughen up on CIS in 1997, then no enforcement resources put in. A client of mine made his subbies into employees then watched his competitors undercut him and he went bust.

Let us hope that the software companies who have been spurred to improve their products will hold out and stay in the market. Those TV ads don't come for nothing you know.

I see that the [***]-fest had already started up again on this thread before I got to see it.......

Thanks (0)
Replying to davidross:
RLI
By lionofludesch
24th Sep 2021 10:22

davidross wrote:

How is this good news?

Another case of HMRC crying wolf and leaving to swing those who have, at their own expense, prepared for change.

B-b-b-b-b-but they have all the benefits of digitising their records !

Thanks (4)
Replying to lionofludesch:
avatar
By Paul Crowley
24th Sep 2021 11:45

And lots of savings in real money per TIIN

Thanks (3)
Replying to davidross:
avatar
By RobertD
24th Sep 2021 17:01

davidross wrote:

How is this good news?

Another case of HMRC crying wolf and leaving to swing those who have, at their own expense, prepared for change. A past example was the announcement that they would toughen up on CIS in 1997, then no enforcement resources put in. A client of mine made his subbies into employees then watched his competitors undercut him and he went bust.

Let us hope that the software companies who have been spurred to improve their products will hold out and stay in the market. Those TV ads don't come for nothing you know.

I see that the [***]-fest had already started up again on this thread before I got to see it.......

Your clients will have the benefit of reducing the tax gap early.

Thanks (2)
Replying to RobertD:
RLI
By lionofludesch
25th Sep 2021 13:45

RobertD wrote:

Your clients will have the benefit of reducing the tax gap early.

Mmmmm - well - that's not the MTDfVAT experience.

Maybe the clients will be able to reduce their own personal tax gaps.

Thanks (0)
Replying to lionofludesch:
avatar
By RobertD
27th Sep 2021 11:30

I was trying to be humorous.

Thanks (0)
Replying to RobertD:
avatar
By johnjenkins
27th Sep 2021 11:57

Come on Robert, this is a serious site with serious comments. I don't think there has been a humorous comment since Spurs last won a trophy.

Thanks (0)
avatar
By L Haldane
24th Sep 2021 10:08

Great News ! And on a Friday too !!

I vote we all take the day off and read the small print later.

Thanks (1)
avatar
By neilrobinson5
24th Sep 2021 10:26

So what are the software companies going to run webinars for now?

Thanks (2)
avatar
By tax91
24th Sep 2021 10:29

Agree with you all. I have lobbied my MP, had various - online - discussions with HMRC. Earlier this week I listened to a presentation by one of the small and medium sized company providers, and costed out how much this new software would cost my client. The result was £37,500 pa - which small business with a turnover of £500,000 can afford that!

Logical process and the Treasury have never fitted hand in glove and in the past we had sensible, solid inspectors bringing SA in. I doubt whether that mindset or capability still exists as so far I have seen little logic or commonsense or knowledge of tax in this vital area of UK plc.

Dusting off how SA came in to being and implementing MTD in a similar form should be looked at by HMRC and even if not all is implemented then the bare bones can be used.

GHarr's comment about lobbying MPs is critical afterall 2024 is an election year!

Thanks (2)
Replying to tax91:
avatar
By kdbr
28th Sep 2021 09:48

"afterall 2024 is an election year!" - or maybe not. All eyes on 2023, and five more years, though I don't think MTD may be part of the election strategy...

Thanks (0)
avatar
By Michael C Feltham
24th Sep 2021 10:33

Gadzooks!

A breath of sanity has blown through Whitehall: at last...

Now all we need to know is that Bozo The Clown, has:

1.Cancelled HS2:

2. Abandoned the sheer idiocy of a Zero Carbon Economy:

3. Stopped shovelling Foreign Aid money to such as China:

4. Realised the utter logistics mess the UK has managed to steer itself into:

5. Has taken sensible and realistic steps to prevent the flood of illegal migrants in their rubber boats pouring into Dover etc:

Well, I can dream!

Thanks (3)
Replying to Michael C Feltham:
RLI
By lionofludesch
24th Sep 2021 10:46

Michael C Feltham wrote:

2. Abandoned the sheer idiocy of a Zero Carbon Economy:

Well, there's the irony.

Apparently there's a shortage of carbon dioxide.

Thanks (2)
Replying to lionofludesch:
avatar
By taxinfo
24th Sep 2021 11:05

lionofludesch wrote:

Michael C Feltham wrote:

2. Abandoned the sheer idiocy of a Zero Carbon Economy:

Well, there's the irony.

Apparently there's a shortage of carbon dioxide.

Talking of climate and irony.....Johnson gives an address on climate....tells the world to "grow up"....then proceeds to quote Kermit the frog.

Thanks (2)
Replying to Michael C Feltham:
avatar
By Ian McTernan CTA
27th Sep 2021 16:24

And I can dream that people stop dragging their political views into the comments section here and actually comment on the tax issues we're discussing...

Thanks (0)
avatar
By Jo Nokes
24th Sep 2021 11:11

ICAEW have reported today that one of the highlights is that the end of period statement (EOPS), which is used to finalise the reporting for each income source, is decoupled from the quarterly updates and will be required for accounting periods. So my angst about how I make adjustments to the client's filed data to get it into shape is somewhat beside the point now. I didn't notice that, and I haven't seen any comments either.

Thanks (3)
Replying to Jo Nokes:
By ireallyshouldknowthisbut
24th Sep 2021 11:34

'Jo, so quarterly filing is officially "in the dustbin" data?

All that phenomenal effort expected of tax payers and their agents to file quarterly.............for literally nothing.

You could say "you couldn't make it up", but it sounds like we might as well.

Thanks (4)
Replying to ireallyshouldknowthisbut:
avatar
By AdamMurphy
24th Sep 2021 18:51

So just to save face rather than scrapping it, we are all going to have to submit whatever each quarter just to meet filing obligations, then prepare proper accounts as usual once a year.
Nothing surprises me anymore.

Thanks (3)
Replying to Jo Nokes:
avatar
By North East Accountant
24th Sep 2021 14:58

Decoupled.....

Option
1) the quarterly updates will be left on some abandoned siding to rust away just like a knackered old train;
or
2) HMRC will issue enquiries asking why the 4 quarterly updates don't add up to the EOPS and ask for a detailed audit log to link the two.

Thanks (0)
Replying to North East Accountant:
avatar
By johnjenkins
24th Sep 2021 15:15

HMRC have had so much stick about quarterly updates and it's been proved that the reason for them is fictitious, so my guess is they are going to be dumped.

Thanks (2)
Replying to johnjenkins:
By ireallyshouldknowthisbut
24th Sep 2021 17:22

@NEaccountant, HMRC are going to have a massive job on their hands if they try to reconcile "original junk data" to "final accounts". They wont even have the technical bookkeeping skills and accounting knowledge for that outside of a small number of staff. Moreover what would be the point? Their job is to collect taxes, not berate tax payers for low quality quarterly data. i was already assuming the top line in my clients accounts would be "Remove Q1 to Q4 bobbins filing", and then "actual data", or "actual data less bobbins to-date = Q5 adjustment"

@John, that would be remarkably sensible but possibly wishful thinking. If HMRC want to invent a new tax then that's up to them. Quarterly filing is where all the pain is.

Thanks (0)
avatar
By johnjenkins
24th Sep 2021 11:27

So IR35 has killed off the lorry drivers and now MTD. Can IR35 be connected with the lack of CO2 also?

Thanks (1)
avatar
By rib
24th Sep 2021 11:39

While a delay is helpful out of the two I would have preferred an increase in the absurdly low turnover threshold of £10000. It is these very small clients who are disproportionately burdened by MTD ITSA.

Thanks (8)
Replying to rib:
RLI
By lionofludesch
24th Sep 2021 11:45

rib wrote:

While a delay is helpful out of the two I would have preferred an increase in the absurdly low turnover threshold of £10000. It is these very small clients who are disproportionately burdened by MTD ITSA.

Indeed. And it has been said from the outset that, if traders wanted all these dubious "benefits" of digital record keeping, they could have them without the need for mandation.

Thanks (3)
Replying to lionofludesch:
avatar
By Paul Crowley
24th Sep 2021 13:18

Agree
Wonder where the statistics are for traders and landlords below that figure
I would be amazed if it were more than 500K

Thanks (0)
Replying to lionofludesch:
avatar
By AdamMurphy
24th Sep 2021 16:24

B-b-but they can BOSS their recordkeeping. What other benefit is needed?!

Thanks (2)
By Silver Birch Accts
24th Sep 2021 13:25

Partnerships,HMRC continues to have a problem with them
The question of what and how partners report under MTD has been an issue. Would each partner be required to have their own software or can one software cope with multiple partner submissions. If that is to be the logical and simpler way then you come to shares. We all know that partnerships , without an agreement,can currently split profits to suit the individual partners. This will be a problem under MTD. HMRC, possible solution, remove this via a Finance Act and replace with fixed shares (ie four partners 25% each)I would be interested in what others think.

Thanks (1)
avatar
By Mr J Andrews
24th Sep 2021 14:26

So I can safely delay my [ already late ] retirement a bit longer ?
What about those poor buggers having already invested so much time, effort and finance into something which wasn't going to happen.

Thanks (0)
Replying to Mr J Andrews:
RLI
By lionofludesch
24th Sep 2021 14:33

Mr J Andrews wrote:

So I can safely delay my [ already late ] retirement a bit longer ?
What about those poor buggers having already invested so much time, effort and finance into something which wasn't going to happen.

They have all the benefits of digitisation for an extra year.

Maybe more. Who knows ?

Thanks (1)
Replying to Mr J Andrews:
avatar
By AdamMurphy
24th Sep 2021 16:22

I wasted a lot of time when this was first touted. When it was initially delayed then became just MTD for VAT, I stopped bothering.

Thanks (1)

Pages