Share this content
Grounded Airplane, Covid - 19 Corona Pandemic
istock_imagean_grounded

MTD ITSA pilot numbers plummet as restrictions take hold

by

With just nine people currently taking part in the Making Tax Digital for Income Tax pilot scheme, professional bodies and commentators are calling for more information on how HMRC plans to scale up its testing process.

25th Jan 2022
Share this content

A Freedom of Information Request from top 20 firm Saffery Champness first reported in the Financial Times revealed a dramatic fall in Making Tax Digital for Income Tax (MTD ITSA) pilot participants. 

The test scheme’s first year in 2018/19 saw 877 people register for the pilot, but that number has now plummeted to just nine, as confirmed yesterday by HMRC.

While the figures are stark, the drop-off can be explained by a tightening of the criteria limiting participation to very simple businesses with either property or sole trader income in 2019/20 which saw more than 500 people removed. Those numbers were thinned out still further by the exclusion of those who had received Covid support grants from the pilot.

Gary Jacobs, CEO at Eazitax, has been involved in the MTD for ITSA pilot since its inception in 2016. At one stage his firm had four clients with relatively simple business needs operating within the pilot scheme, but he told AccountingWEB that once they received the self-employed income support scheme they were no longer considered active.

Scale-up challenges

“We knew the pilot numbers were low but not this low,” said regular AccountingWEB columnist Paul Aplin. “Given there are so many restrictions on who could join however, it’s hardly surprising.”

“My concern is how you scale this up in the time left available, from just a handful with very simple tax affairs to more than four million small businesses and landlords with potentially complex tax affairs and multiple income sources?” continued Aplin, who called for a rapid relaxation of the restrictions on who can participate in the pilot programme in August last year.

Robert Langston, partner at Saffery Champness and the firm’s Making Tax Digital lead, commented that for larger firms the MTD challenge was a question of scale. 

“We’ve got 3,000 clients that are going to be affected by MTD ITSA,” he said. “That’s a lot to be engaging with and the challenge is not something that can be underestimated if you think about where many are at the moment.

“Our issues are about eligibility,” continued Langston. “We have tech-savvy clients who we want to put on the pilot but invariably they don’t fit the criteria. HMRC is engaging on this but our clients have complex needs and the system isn’t something that can be turned on and off overnight.”

Lack of full-cycle run

HMRC has previously stated a desire to limit pilot numbers to provide “additional support to the first customers in the service before testing at scale”. According to sources, the tax authority plans to open up the trial to more people from April 2022, two years ahead of launch, but hasn’t provided further details.

There is concern among technical specialists that this will not allow for a large-scale ‘full cycle’ run of the scheme, with businesses starting the pilot phase in April 2022, completing a full year’s trading in April 2023 and filing an end of period statement and final declaration by 31 January 2024.

“Without the full-cycle run involving a wide range and significant numbers of taxpayers, how can [HMRC] say they have fully tested the system?” commented tax writer and adviser Rebecca Cave, “What's more, a new penalty system is also due to apply from 6 April 2024, so the first few periods of MTD ITSA will not only be testing the MTD structure in a live environment but the new penalties as well.”

Roadmap required

Register for free to continue reading

It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:


Content lock down, tick icon

View all AccountingWEB content


Content lock down, tick icon

Comment on articles


Content lock down, tick icon

Watch our digital shows and more

Access content now

Already have an account?

Replies (41)

Please login or register to join the discussion.

By ireallyshouldknowthisbut
25th Jan 2022 15:05

This pretty much confirms MTD aint happening any time soon, at least on a mandatory basis.

Yet another kick down the line for a couple of years seems to be on the cards. One hopes is rolls into some very long grass and is forgotten about as far as pointless quarterly reporting goes. There is no justification for Q reporting. Businesses that benefit from software are (some 7-8 years since this farce was thought up) already on it. Those that left are by and large not suitable either due to the business size or type, or the owner's preferences.

Thanks (16)
Replying to ireallyshouldknowthisbut:
Tornado
By Tornado
25th Jan 2022 17:55

"This pretty much confirms MTD aint happening any time soon, at least on a mandatory basis."

I don't think it would be capable of working on a voluntary basis either as that would effectively be a Pilot and we can pretty much guess that the current Pilot does not work anyway.

MTD seems so much like a Non-Event already. RIP

(I still wonder what the (at least) 2000 million pounds budget has been spent on)

Thanks (2)
Replying to Tornado:
avatar
By Paul Crowley
25th Jan 2022 18:36

"(I still wonder what the (at least) 2000 million pounds budget has been spent on)"
That is an awful lot of cup cakes at pointless meetings
But a bargain compared with Covid support loans now lost. Someone paid tax on the MTD income

Thanks (1)
avatar
By bluebaron
25th Jan 2022 14:39

Unbelievable. If a client's records are too complex for the pilot, then surely they are too complex to be mandated for MTD in 2024. Good grounds for exemption, I'd have thought.

Thanks (8)
Replying to bluebaron:
avatar
By Hugo Fair
25th Jan 2022 17:30

If it wasn't so catastrophically frightening it would be side-splittingly funny.

So the same HMRC which, over the last 5 years, has been getting slower & later in releasing technical information required by software developers (because they've no concept of the specification/development/testing/documentation cycle) ... is now finding, when things like SEISS jump out of the woodwork, that they can't cope with it.

And this is 'things' that they knew more about than commercial developers or agents or taxpayers - who are all expected to turn on a sixpence and move on.

The aspect of MTD that seems to have escaped the Treasury planners is that it is built not so much on digitalisation but on integration (which is the old-fashioned word for APIs).
So, irrespective of what software developers achieve OR of what data is entered by taxpayers OR what agents manage to correct/adjust in those figures ... the whole system grinds to a halt if the HMRC components don't work.

And unlike one-way 'integration' (such as RTI) where c0ckups at HMRC's end can be hidden (or even denied), in the two-way world of APIs there's nowhere to hide!

Anyone want to play a game of Agile computing?

Thanks (3)
avatar
By MCV71
25th Jan 2022 14:45

Just scrap this compulsory madness now. If HMRC want to save face just leave it open as an option for people who may want to voluntarily submit figures quarterly.

Thanks (13)
Replying to MCV71:
avatar
By Paul Crowley
25th Jan 2022 18:37

All nine of them

Thanks (9)
Replying to Paul Crowley:
Tornado
By Tornado
25th Jan 2022 19:47

"All nine of them"

I am thinking that swathes of people left the Pilot because the system was unable to deal with their particular requirements and the nine that are left are more suited to the system. But hang on, it seems inevitable that as the Pilot continues, that nine will be further whittled down as the system fails to meet their needs until there is just one member of the Pilot left whose only income is from one some simple safe source such as a developing MTD for HMRC.

Thanks (5)
Replying to Tornado:
ghm
By TaxTeddy
26th Jan 2022 10:27

Just one left? Ah, the Agatha Christie Method.

BTW - with just one participant HMRC will be able to claim 100% success rate.

Thanks (4)
Replying to TaxTeddy:
avatar
By D V Fields
26th Jan 2022 12:55

Are you that confident?

Thanks (3)
Replying to Tornado:
Morph
By kevinringer
26th Jan 2022 13:12

Tornado wrote:

... just one member of the Pilot left whose only income is from one some simple safe source such as a developing MTD for HMRC.

That person will be trading through a company so won't meet the pilot criteria.
Thanks (3)
avatar
By GHarr497688
25th Jan 2022 15:13

HMRC still has time to save face and change things round a little. If I was in charge I would:

Stop the mandated process immediately and let Taxpayers have a choice.
If the choice is to use the MTD ITSA system give a tax credit to the affected tax payer of £100.
Once the results of the Incentive and how Taxpayers had evaluated MTD ITSA with compliance , tax paid promptly , records checked for errors then review the mandated process in say 2027- this would make sure the system worked well and was being used by those who benefited which would then give an incentive to the MTD sceptics.

The above would :

Give taxpayers a choice.
Give taxpayers the incentive.
Produce a caring public image for HMRC.
Give the IT and Software guys more time to plan.
Relice ve the anxiety and uncertainty surrounding the scheme for ALL.

Thanks (7)
LL
By RickyRoark
25th Jan 2022 16:54

Point of reference for the 9 participants; HMRC have ~66,000 members of staff. More than 12.2 million customers are expected to complete a tax return for 2020/2021.

I dread to think how much money they've wasted on MTD so far (If anyone has accurate figures please send them to me).

Thanks (2)
Tornado
By Tornado
25th Jan 2022 17:12

Nine people in the Pilot? That is nine more than I had expected.

Tom has a very upbeat spin in his article but even those that passionately believe in MTD must now be able to see that this is a lost cause that needs to be quietly buried, and appreciate that we are much better off with the system we already have which can be improved and developed with relative ease.

Thanks (3)
avatar
By Paul Crowley
25th Jan 2022 18:46

https://www.accountingweb.co.uk/any-answers/only-9-people-are-in-the-mtd...

I honestly thought that the figure could not be correct
I must learn to trust us (not HMRC spin) a bit more

Trouble is even I have wasted time trying to organise the paper clients for the expected new penalty regime

Thanks (2)
Replying to Paul Crowley:
avatar
By Hugo Fair
25th Jan 2022 19:24

Like you I was dubious when I read that post (surely not even HMRC could make that amount of a pig's ear of it?) ... but then noted that the info had been gleaned from a story emanating from Steve Wade (of EY) who has always been both calm & accurate - and so I decided to believe!

A bit unfair (if it goes ahead) but I'd love to know the sunk cost per pilot 'member'?

Thanks (2)
avatar
By Agutter Accounts
26th Jan 2022 09:37

The MTD for ITSA is a disaster waiting to happen unless HMRC makes radical changes. The threshold of £10k turnover in particular has elicited much critical comment on this forum with good, sound reasoning.

Whether we will be able to beat sense into the insensible is anyone's guess. Once government gets an idea in its head it is loath to concede that there needs to be a change in operation until it is blatantly obvious their way is a disaster. I am glad I shall be retiring before April 2024.

Thanks (3)
avatar
By Self-Employed and Happy
26th Jan 2022 09:56

Maybe HMRC and Rishi should just forget about this vanity project. In my opinion MTDIT will actually lead to even less compliance.

The Tax Gap has actually widened, yet this was one of the main reasons sold for MTD in the first place.

What the Gov / HMRC need to do is actually go on a huge recruitment drive and fully train staff, also completely re-organise from top to bottom as it simply is not fit for purpose.

Thanks (5)
Replying to Self-Employed and Happy:
LL
By RickyRoark
26th Jan 2022 12:40

Agree with your first 2 points.

HMRC needs to remember its role of being a tax collector and implement mechanisms to help accountants rather than hinder them. For instance, basic things like being able to view a client's P60/P45 through the Agent Tax account.

Thanks (3)
Replying to RickyRoark:
avatar
By Self-Employed and Happy
27th Jan 2022 13:21

YES!!!

There was a brief time you could also get State Pension Figures directly pulled into tax return software.

HMRC's systems completely wreck the efficiency of practices, although it's JUST started to happen for us, something as simple as the clients VAT Balance and payments being available via the ASA saves time.

HMRC simply don't understand that accountants (generally) clear up a lot of mess before presenting figures to HMRC, if they think they can do the same tidy up process with untrained and not enough staff, allied with horrendous systems let them crack on, if anything it'll widen the tax gap and drive more people to accountants who used to file themselves.

Thanks (0)
avatar
By JohnB
26th Jan 2022 10:05

Reminds me of the old question:
What if they gave a war and nobody came?

Thanks (2)
avatar
By North East Accountant
26th Jan 2022 10:18

I spoke to a lovely lady at HMRC the other day who couldn't be more helpful....10 minute wait (I'm fine with that) and she sorted the problem out at HMRC's end there and then....fantastic.

I asked what the current wait time on answering a letter was and she said they have been told to say Sept/Oct 2022 before any post that is currently in will be dealt with.

How on earth does HMRC expect to deal with something as complex as MTD ITSA if they can't even deal with and answer letters in 9 months?

It's about people HMRC .....people who can actually deal with stuff and take responsibility to action something.

The MTD pilot shows how many people have faith in how well HMRC will handle MTD ITSA........practically none.

For me our current plan is to not put one client in until Mar 2024 and only then if MTD is still a goer register them all on masse.

Thanks (6)
avatar
By GW
26th Jan 2022 10:27

Does this mean we are going to be told "the pilot was completely successful" because all nine got it to work?
because as we know 9/12,200,000 is a representative sample!?

Thanks (5)
avatar
By petestar1969
26th Jan 2022 10:32

Hopefully they'll just drop it altogether.

Thanks (1)
avatar
By Adam_H
26th Jan 2022 10:45

I use IRIS, who I am sure is listed as one of the compliant softwares, but when I asked about enrolling in the pilot I was told I couldn't. I have some very straightforward clients that could easily fit the criteria, unless also have a P60 along with the rental income would be too much for the system.

It's one thing the Government wasting huge amounts of money on a system that won't work, but they are also making us waste huge amounts of time trying to get ready for something that nobody really knows how it will work. I will learn better by experience than from someone telling me what they think I need to do...

Thanks (0)
avatar
By steve 12321
26th Jan 2022 10:50

If they had any sense or would be prepared to listen to us, they would abandon this now and sack anyone who continues to push this forward. Then start looking to recover Covid support fraud. MTD for IT or CT has no benefits (not to the people that pay the taxes). Once a year self assessment and payments on account (even if it's 3 or 4 not 2). It's pure madness to keep it going. Put it out (us) of its misery asap!

Thanks (4)
avatar
By Mr J Andrews
26th Jan 2022 11:01

Looks like the Emperor's New Clothes are starting to wear even thinner at long last. Judging by so much negativity, CEO Harra's MTD road map is definitely a one way ticket to Outer Mongolia.
But come on Harra , surely you can come up with some more dumb [***] ideas ?

Thanks (3)
Morph
By kevinringer
26th Jan 2022 13:07

I attended a HMRC MTD event in 2016 when HMRC said they were confident they'd get 800,000 signing up for the MTD pilot within 12 months. After 6 years they only have 9 participants. That is a massive failure that even HMRC can't wriggle out of.

A pilot is supposed to be able to handle real-life so after 6 years it should be able to handle the entire range of taxpayers including those who claim Covid grants. In the early days HMRC boasted how "agile technology" would be used to enable MTD to cope with changes. Covid has proved that the "agile technology" does not exist.

With only 9 participants after 6 years, this represents at cost of several £millions per participant. HMRC should be challenged on whether this has been value to the taxpayer.

We already know how MTD VAT has completely failed in its objective to close the tax gap. How much wider will the tax gap be under MTD ITSA? HMRC should learn that MTD ITSA is only going to create bigger problems for HMRC.

HMRC heads should roll for this colossal waste of public finances. How many schools could have been built with that money?

Thanks (11)
Morph
By kevinringer
26th Jan 2022 13:14

"Those numbers were thinned out still further by the exclusion of those who had received Covid support grants from the pilot"

Hold on, that was 2020. Today is 2022. Does that mean the pilot has been running with single figure participation for 2 years?

Thanks (1)
Morph
By kevinringer
26th Jan 2022 13:28

If the pilot had 877 participants in 2018-19 and 3 years later has 9, this this rate of shrinkage continues it will be down to zero participants in 11 days.

Thanks (2)
avatar
By petestar1969
26th Jan 2022 14:13

Of course if they do kick MTD ITSA into touch forever we won't have to endure any more of those irritating adverts for Sage/QB/Xero etc..

Just imagine how PO'd those software companies will be and how much compo they'll want though.........

All in all a complete c*ck up!!

Thanks (1)
Replying to petestar1969:
paddle steamer
By DJKL
26th Jan 2022 14:41

Excellent.

Whilst MTD IT is really no longer going to impact me I still shout at the TV when the various adverts appear.

Thanks (1)
Replying to petestar1969:
Morph
By kevinringer
26th Jan 2022 14:44

Pete, the software industry has made a fortune already. Take Sage as an example. Pre-MTD I could buy a perpetual licence for Sage Instant for less than £100. That software could well be used for 10+ years before it had to be upgraded, cost of less than £1 a month. Along comes MTD VAT and Sage only make the MTD VAT software available on subscription, cost £30 a month. That's a 30x increase in income for Sage. And all Sage had to do was replace the existing VAT filing module with the MTD VAT filing module. Easy money for Sage. In contrast MTD ITSA means big changes for the software suppliers and I don't think they'd be able to increase their charges much above what they are currently charging, so they would struggle to recover the extra costs. So stopping MTD ITSA will also be a benefit to the software industry.

Thanks (1)
avatar
By DMBAcc
26th Jan 2022 15:13

Whilst the temptation is to say "told you so" it doesn't make me feel any happier. Seriously, I DID have many sleepless nights when this was first proposed especially when it was all supposed to be coming in 2021. I have never used software companies. Most of my clients keep excellent manual books and now many use a simple spreadsheet I designed for them. It updates a P&L account and a balance sheet each time they make an entry so they can immediately see the current state of play. Naturally they make mistakes but these can be corrected easily so that when I see the end of year result it is relatively easy to transfer to the online tax return. They are happy because of the little time they have to pay me and I am happy because my job is relatively straightforward and predictable. I might just hang a round a little longer rather than jump ship on 01 Oct 2023.

What DOES get me though is why the opposition aren't castigating the Gov't daily and on every media outlet they can find. Billions lost because the CS are too tired to chase fraudsters and again too naive to think a computer would sort out all their staffing problems. The administration of this country really needs a shake up - it doesn't matter which political party is in power. It was well said that the British Army fought well despite the CS support not because of it. Utter, utter shambles. Just think of the wasted energy and money in trying to cover this shambles up.

Thanks (1)
avatar
By flightdeck
26th Jan 2022 19:36

Embarrassing.

Thanks (1)
avatar
By Catherine Newman
27th Jan 2022 17:18

I have taken on a new client who uses Quickbooks online. I tried to use the bank feed he has set up. It was far quicker just to go through the bank statements and input using my knowledge and gut reaction. I have abandoned it. He now understands why.

Thanks (0)
Replying to Catherine Newman:
Morph
By kevinringer
27th Jan 2022 17:26

Bank feeds and rules are dangerous in the wrong hands. The cheapest filling station locally is Morrisons. One client created a QB bank rule that accounted for for Morrisons debit card transactions as fuel and claimed the VAT. He thought it was great because it did it automatically and he didn't need to do anything. You can guess what happened next: the bank rule was applied to everything "Morrisons" including his weekly grocery bill: claiming the non-existent VAT and accounting as motor expenses. He didn't want our help until the annual accounts were done when we pointed out the mistake and all the VAT he had to repay. He was not happy. If the client had done his own ITSA (as HMRC think taxpayers will when using software), he would have claimed income tax relief on his groceries too. That's why we know software in untrained hands will increase the tax gap.

Thanks (0)
Replying to kevinringer:
avatar
By Catherine Newman
28th Jan 2022 10:59

That was exactly what was happening in my case.

Thanks (0)
avatar
By CJaneH
28th Jan 2022 10:54

I think the rot started when bringing in Self Assessment and getting rid of submission of accounts to the local tax office they also brought in 3 line accounts, and no capital allowance computations.
This encouraged the idea for traders submitting their own tax return and some shoddy accountants of adding figures up on a scrap of paper and putting figures directly onto the return. HMRC staff often did not understand accounts in the days when they were submitted, they now think they can be completely bypassed, bank statement to tax return on one step!

Thanks (0)
Morph
By kevinringer
02nd Feb 2022 17:01

HMRC have just announced that MTD ITSA will be closed for maintenance Thursday and Friday. There's so few people in the pilot it might have been more efficient if HMRC had just phoned the participants to tell them. Then again, I guess it very unlikely any one of those 9 would be doing anything MTD ITSA on those particular days.

Thanks (0)
avatar
By AndrewV12
15th Feb 2022 13:45

MTD its on a par with HS2, problems after problems, god knows what the costs of MTD are... what ever they are they are certainly over over budget and under delivering.

It should never have started.

Thanks (0)