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New MTD updates fail to fully address uncertainty

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New legislation and guidance for Making Tax Digital introduces some welcome changes, but there are still unanswered questions. Emma Rawson takes a closer look.

27th Feb 2024
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The past few weeks have been busy for those following the ups and downs of Making Tax Digital for income tax self assessment (MTD ITSA). We’ve had research reports, an updated policy paper and a rather robust response by HMRC to criticism received from the Public Accounts Committee.

We also received long-awaited updates to regulations and an accompanying update notice. Taken together, these clarify some important aspects of MTD ITSA.

Why are the regulations so important?

The main primary legislation paving the way for the introduction of MTD ITSA is found in Finance Act 2017. However, much of the detail on what will actually be required, and when, is relegated to secondary legislation – the Income Tax (Digital Requirements) Regulations 2021.

These regulations were first issued three years ago and are now terribly out of date. They still set the income threshold for MTD ITSA at £10,000 and the commencement date as April 2024. 

To prevent MTD ITSA starting in just a few weeks, we urgently needed some “amending regulations”. Following a short period of consultation over the festive period, the final version of these was laid in Parliament on 22 February in the form of the Income Tax (Digital Requirements) (Amendment) Regulations 2024

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Replies (59)

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By FactChecker
27th Feb 2024 15:23

"New MTD updates fail to fully address uncertainty"
... best headline I've seen in ages.

Assuming we're meant to read between the lines, it's up there with:
"Drowned man fails to fully address breathing underwater"!

Thanks (18)
Replying to FactChecker:
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By FactChecker
27th Feb 2024 15:42

But on with the show (nearly said 'the circus') ...

The amending regulations indeed confirm "the removal of the EoPS as a standalone process", but don't appear to specify what replaces it or will make a connection between the QUs and everything else (accounts, tax returns, etc)?

So the throwaway conclusion that "there remains much uncertainty" is wholly consistent with the title of this piece - in both accuracy and understatement.

It’s not merely that it's "still not clear exactly what a business needs to enter into their digital records and when (nor have requirements for digital links between those records and any onward submissions to HMRC been clarified)".
The proposed 'journey' on which taxpayers and agents (and indeed software developers) will be mandated to embark - not once but as part of their day-to-day operations - is far from "unclear". In fact it is incomplete in almost every aspect!

It's really hard to pretend that HMRC actually believe what they say anymore - but their recent Update Notice is as useful as giving someone a detailed shopping list without any explanation of where the Store is or of how to get there or what to do if any item is out of stock or ... (the list is endless).

HMRC = absolutely hopeless!
How long before 'Abandon all hope, ye who enter' appears by the doors to 100 Parliament St?

Thanks (10)
Replying to FactChecker:
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By NotAnAccountant2
28th Feb 2024 10:29

FactChecker wrote:

but their recent Update Notice is as useful as giving someone a detailed shopping list without any explanation of where the Store is or of how to get there

It's a nice analogy but I think it's too kind to HMRC. It's a reasonable assumption that most people will know where the shops are...

It's more like a shopping list that has things like:
"a screw to go in the hole in the thingy where one has fallen out"

and then giving it to someone who wouldn't know what M5x20 means even if that was the part you wanted.

Thanks (4)
Replying to NotAnAccountant2:
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By johnjenkins
28th Feb 2024 10:36

Is that like E=Mc². Anyway it's all relative.

Thanks (3)
Replying to FactChecker:
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By Rob Swan
02nd Mar 2024 05:55

FactChecker, may I propse a small amendment to your last line:
'Abandon all hope, ye who [press] Enter' ?

Thanks (2)
Chris M
By mr. mischief
27th Feb 2024 16:02

Nice of HMRC to bring sharp clarity to my target retirement date.

Thanks (22)
Replying to mr. mischief:
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By Geoff56
27th Feb 2024 16:13

+1

Thanks (2)
Replying to Geoff56:
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By johnjenkins
28th Feb 2024 09:52

+2

Thanks (2)
Replying to mr. mischief:
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By Ammie
28th Feb 2024 10:00

+ 3

Thanks (2)
Replying to mr. mischief:
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By petestar1969
28th Feb 2024 10:27

And another...

Thanks (2)
Replying to mr. mischief:
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By AndrewV12
28th Feb 2024 10:57

I thought we all had to work until we are 70...... ish.

Thanks (1)
Replying to AndrewV12:
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By Homeworker
28th Feb 2024 12:29

AndrewV12 wrote:

I thought we all had to work until we are 70...... ish.


I am 71, so it is definitely time to go! I've been hanging on to a few pensioners and high earners but think I've had enough, even though most of them won't be in MTD.
Thanks (2)
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By justsotax
27th Feb 2024 16:59

remember when tax compliance work was a dead man walking.......

Thanks (1)
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By PAULLEWISFCCA
28th Feb 2024 09:35

scrap the idea - in fact just scrap HMRC completely along with their extortion/slavery racket

Thanks (10)
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By Eric T
28th Feb 2024 09:46

So - we can submit "three line accounting" type information (for those who qualify) on a three monthly basis.

What in God's name use is that to HMRC? Three line account only asks for total income, total expenditure and resultant profit or loss.

I thought that the original principle behind MTD for Income Tax was that sole traders and landlords were supposed to use commerciall software to more or less upload their entire bookeeping data to HMRC every quarter.

Has that concept now been abandoned?

If it has, what is MTD for?

Thanks (14)
Replying to Eric T:
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By johnjenkins
28th Feb 2024 09:55

You have to ask what MTD is for?
What is it good for, absolutely nothing. Uhhhhhh (I can sing it better than spell it>

Thanks (9)
Replying to Eric T:
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By petestar1969
28th Feb 2024 10:28

Its all about control, bog all to do with whether or not the information is useful.

You must comply!!!!

Thanks (10)
Replying to Eric T:
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By AndrewV12
28th Feb 2024 10:56

lets not knock it.

Thanks (2)
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By Tom+Cross
28th Feb 2024 09:46

As with all things 'Harra' it's a fudge.
The inherent problem, and don't expect change, anytime soon, is supreme arrogance on the part of HMRC. Do as we say, whether you believe in the journey or not. And which hardware provider will be the driving force of any future, permanent designer, of an MTD arrangement. Fujitsu?
You could just see, in 30 years time, a programme on the ITV network; 'Master Bates and HMRC'.
If it wasn't actually possible ..............................

Thanks (12)
Replying to Tom+Cross:
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By AndrewV12
28th Feb 2024 10:55

I was thinking that myself but more in the present, if i was struggling to my point across to HMRC staff, i was thinking of using the post office scandal as leverage and saying to the HMRC agent, its Horizon all over again and i don't want to see you dragged in front of all cross party Westminster committee to defend the in-defensible, with the nation baying for your blood.

Thanks (0)
Replying to Tom+Cross:
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By FactChecker
28th Feb 2024 11:57

I presume that downgrading Mr Bates to a mere Master is deliberate? Although the chance of finding someone for whom HMRC is any part of their chosen fantasy world ...

Thanks (2)
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By johnjenkins
28th Feb 2024 10:25

Great Article, Emma.

Thanks (2)
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By AndrewV12
28th Feb 2024 10:49

'The first taxpayers (with income of more than £50,000) will come in from April 2026.
Those with income between £30,000 and up to £50,000 will be brought in from April 2027'

They sound a long way away, but the time will fly by, brace yourself.

Thanks (3)
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By Janski
28th Feb 2024 10:51

With me retiring inside the next 3 years, I've already told clients affected by this that I won't be dealing with MTD for Income Tax and given them a timescale by which point they need to have moved to another accountant. Bliss for me!

Thanks (4)
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By youngloch
28th Feb 2024 10:52

Wait for the rush of incorporations to avoid this inevitable car crash............

Thanks (2)
7om
By Tom 7000
28th Feb 2024 11:08

It will be like VAT reg when people go over the limits and dont tell you for 18 months....

The tsunami of work is coming... we will need 15% more people I worked out to deal with this...
Accounts fees up 200%.... not £130 like it says in the blurb .. is my estimate

Thanks (7)
Replying to Tom 7000:
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By philaccountant
28th Feb 2024 14:14

Spot on. I doubt very much there is the accounting/bookkeeping capacity in the country to deal with this influx of work, whilst at the same time making the usual annual submissions. Especially as HMRC have decided very stupidly to put every taxpayer onto the same quarterly rotation.

Do we employ an army of bookkeepers 7 days a week for one month every quarter, then have them sit on their hands for the next two months waiting for the next influx of data? Or do the clients pay for them to be employed on an ongoing monthly basis?

Has anyone at HMRC even considered that this might be a completely impassable stumbling block!?

Do they understand the difference in time pressure between having 10 months after the tax year to submit a tax return and doing it on a quarterly basis - whilst also having to submit that same annual return?

As you rightly say, it's going to cost a lot more than £130! Many times that I'd have thought.

Thanks (6)
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By Mr J Andrews
28th Feb 2024 11:18

What's Next ?
I think the last sentence should read ''...later rather than sooner....'' which will no doubt be the case.

Thanks (0)
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By Gazzer1962
28th Feb 2024 11:39

Will all this be helped if/when Labour get in ? I did read somewhere a while back that they would scrap MTD (gets my vote !)....merely because it's a Conservative Govt idea .....or more recently that the entry figure would be the VAT threshold...also another good idea.

Thanks (0)
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By PAULLEWISFCCA
28th Feb 2024 11:56

Ben Fogles New Lives in the Wild looks more desirable every week

Thanks (3)
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By Polybin
28th Feb 2024 12:10

As the MOD recently back tracked on allocating housing based on the number of kids a service person had because a lot threatened to leave. Maybe HMRC will give up on MTD ITSA when they see all the accountants doing the same. It’s good to know our public servants think in advance when making policy decisions.

Thanks (3)
Replying to Polybin:
By Nick Graves
28th Feb 2024 12:26

Polybin wrote:

As the MOD recently back tracked on allocating housing based on the number of kids a service person had because a lot threatened to leave. Maybe HMRC will give up on MTD ITSA when they see all the accountants doing the same. It’s good to know our public serpents think in advance when making policy decisions.

In the words of Mr. Harr...er, Brittas, "would that it were..."

I think that there is something fundamentally mis-wired in the collectivist mindset and they'll be rubbing their hands with glee at the thought of all the extra money they can pull in with pesky beancounters out the way.

Then of course, there will follow more collectivist 'enabling legislation' to compel all the retired accountants to return to work to sort out the cluster.

Stick a fork in this country - it's done.

Thanks (0)
Replying to Nick Graves:
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By PAULLEWISFCCA
28th Feb 2024 14:26

The State keeps growing until it collapses. After it has destroyed far too many lives.

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By AdamJones82
28th Feb 2024 14:28

It's not happening in 2026, they're still miles away from being ready

Thanks (1)
Replying to AdamJones82:
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By johnjenkins
28th Feb 2024 14:34

Would you say that would be just 45p a mile or would you go for the 25p a mile?

Thanks (2)
Replying to AdamJones82:
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By Eric T
28th Feb 2024 15:44

AdamJones82 wrote:

It's not happening in 2026, they're still miles away from being ready

I agree.

They still seem to be confused about fundamental aspects as to how this is supposed to work.

And to think this was all supposed to have been up and running six years ago!

Thanks (0)
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By execprac
28th Feb 2024 15:58

MTD a waste of time and money as currently proposed ... Small SME's need support to grow the economy and provide affordable local services (environmentally!), not tax bureaucracy.

The future current Conservative, or future "Reform" or Labour government need to cancel MTD before it adds yet another layer of cost and administration causing further distress and disincentive to the already incredible burden faced by small businesses and the Accountants/Agents that support them.

Campaign for:

MTD Exemption for all tax payers with income below VAT Threshold (to provide breathing space for start-up businesses)
Quarterly reporting abandonment (greater thought to quarterly tax payments on account in the existing system if this is thought to be necessary, what use is 3 line reporting!)

Hope someone listening

Thanks (4)
x
By rockallj
28th Feb 2024 16:10

MTD is a waste of money & won’t work.

The tax system is too complicated for a start.

Digital systems are treated a panacea for cost cutting

All compliance will take longer than it currently does & will be onerous.

This all stifles innovation & ties the economy in red tape.

Thanks (3)
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By SteveP
28th Feb 2024 17:25

I don't understand why the limit cannot be set as the VAT registration threshold. If you are registered for VAT you should have good enough systems to make compliance relatively simple.
Below that you are unlikely to make much profit (unless providing services), so little risk of tax being lost when allowances are deducted.
Where is the cost / benefit analysis?

Thanks (0)
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By Marlinman
28th Feb 2024 17:28

I can't be bothered to fit all the amendments into earlier drafts. By income do they mean turnover, accounting profit or adjusted profit? What if you have more than one business?

Thanks (0)
Replying to Marlinman:
Emma Rawson
By Emma Rawson
29th Feb 2024 17:02

For the purposes of the £30k / £50k thresholds, we're looking at turnover. If you've more than one trade and/or property business you need to combined them. There's more on this at https://www.att.org.uk/technical/how-does-income-exemption-work-mtd-itsa

Thanks (1)
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By JD
28th Feb 2024 17:31

Clarity to retirement date perhaps, or ceasing to act for those with income between £85,000 and £50,000, unless they are prepared to pay the additional cost/follow our system.

The more serious point is of course that many of these smaller businesses will become unrepresented, and be a source of a far higher error rate, as they try and do things themselves using tech they do not understand.

Thanks (1)
Pile of Stones
By Beach Accountancy
28th Feb 2024 18:12

I need a software developer to write the following app:

- Take figures from 2 years ago (as client won't have sent you last year's yet)
- Divide by 4
- Automatically send to HMRC on due dates
- Do year end as normal

Sell the app at £1 per user.

I think I'll make a fortune...

Thanks (2)
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By adjadj
29th Feb 2024 07:42

Regrettably HMRC are staggering the two implemtations by just one year. The second tranche will go live before the end-of-year issues have surfaced. HMRC will thus have to support Tranche 1 through end of year AND support the second Tranche ADD support the all the other taxpayers as well!

Thanks (1)
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By twohaporth
29th Feb 2024 21:36

MTD is a waste of time and resources.

HMRC aren't up to designing a workable system and operating it.

Joe Public hasn't got the time to waste on this nonsensical process nor money to spend on getting it done.

Long and short is that the whole idea is mindblowingly stupid and won't bring in enough taxes to cover its cost.

With a bit of sensible investigation work on the back pocket brigade they could achieve the extra revenue and improve the tax gap. Imagine stopping the cowboys - increase tax take, reduce benefits payout and stop the rest of us paying their taxes for them and the same at the top of the scale with the footie players etc- I don't see why I should pay their taxes for them.

Total lack of brains and common sense in HMRC - I suppose they are mostly WFH and the newspapers are a better read than work.

Thanks (1)
Replying to twohaporth:
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By johnjenkins
01st Mar 2024 09:06

You can say that again.

Thanks (0)
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By twohaporth
29th Feb 2024 21:36

MTD is a waste of time and resources.

HMRC aren't up to designing a workable system and operating it.

Joe Public hasn't got the time to waste on this nonsensical process nor money to spend on getting it done.

Long and short is that the whole idea is mindblowingly stupid and won't bring in enough taxes to cover its cost.

With a bit of sensible investigation work on the back pocket brigade they could achieve the extra revenue and improve the tax gap. Imagine stopping the cowboys - increase tax take, reduce benefits payout and stop the rest of us paying their taxes for them and the same at the top of the scale with the footie players etc- I don't see why I should pay their taxes for them.

Total lack of brains and common sense in HMRC - I suppose they are mostly WFH and the newspapers are a better read than work.

Thanks (0)
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By lordburnside
01st Mar 2024 11:24

Is the purpose of MTD IT to enable HMRC to inspect more taxpayers records? I can see that at the moment they have not the staff to check that much.

An HMRC program that looks at every transaction in seconds would greatly assist in finding all sorts of errors or fiddling.

I think this is the purpose of MTD IT. Better surveillance of the self employed.

Thanks (0)
Replying to lordburnside:
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By johnjenkins
01st Mar 2024 12:41

You can say that again

Thanks (0)
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By lordburnside
01st Mar 2024 11:24

Is the purpose of MTD IT to enable HMRC to inspect more taxpayers records? I can see that at the moment they have not the staff to check that much.

An HMRC program that looks at every transaction in seconds would greatly assist in finding all sorts of errors or fiddling.

I think this is the purpose of MTD IT. Better surveillance of the self employed.

Thanks (0)

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