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HMRC has more time to resolve outstanding issues with MTD ITSA
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Treasury delays MTD ITSA for two more years

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The Treasury this afternoon confirmed a two-year delay to the Making Tax Digital for income tax (MTD ITSA) timetable.

19th Dec 2022
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First Secretary to the Treasury issued a written statement confirming the changes at lunchtime on Monday 19 December.

The timetable change followed weeks of urgent calls from professional bodies such as the CIOT, HMRC’s own Administrative Burdens Advisory Board, tax software representatives and practitioners.

Bowing to the inevitable, financial secretary to the Treasury Victoria Atkins released a a ministerial statement setting out adjustments to the scope and timing phases of MTD ITSA:

  • A two-year delay until April 2026 for mandatory MTD ITSA filing.
  • Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027.
  • The situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses.
  • Partnerships will not be brought into MTD for ITSA as previously planned in 2025.
  • Points-based penalty system to be extended to MTD ITSA filers when they join. 

While Atkins said the government remains committed to introducing MTD for ITSA to partnerships, the decision on when they might join the scheme will be taken at a later date, as for those on less than £30,000. 

“The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC,” the minister wrote.

To maximise the benefits of MTD for small business, the government opted to allow more time to prepare, “so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

Further details and comments from HMRC are available in a departmental release explaining the phased introduction of MTD ITSA. Rebecca Cave will digest the implications for AccountingWEB readers shortly.

Early warning

The hotly anticipated MTD ITSA reset was inadvertently revealed shortly after 9am on Wednesday 14 December in a gov.uk post announcing an extension to the MTD ITSA pilot scheme that was taken down shortly afterwards. Update emails were also sent detailing the extension.

To many involved in UK tax, it seems like we’ve been here before. After her appointment in October, Atkins took her time to get on top of the brief, but ultimately bowed to advice and pressure from all directions that MTD ITSA was not ready to be introduced in its current form by April 2024.

The last time the Treasury faced such a unified chorus was last year, when the previous FST Lucy Frazer announced a 12-month delay to the timetable in September 2021.

Key issues still unresolved

In the intervening time, HMRC responded to some of the criticisms by bringing in experienced tech managers to steer the project in the right direction. Yet in the words of one software developer at the recent AccountingWEB Live Expo, “We’re having the same conversations now we that had 2-3 years ago. As far as I know nothing has changed since last year. I can’t think of a single important question that has been answered in the last two years. New APIs continue to be released, but none of the core issues have been addressed.”

If the length of the two-year extension comes as a surprise, software industry insiders suggested that with the issues outstanding, and potential complications of a general election and civil service purdah, a one-year delay wouldn’t work, so it was a choice between either two years or nothing.

Coincidentally, Sage CEO Steve Hare published an article in The Times last Wednesday commenting on the widespread MTD delay rumours: “We are now hearing that Making Tax Digital could once again be pushed back further,” he wrote.

“I understand that some have concerns about the pace of change. However, I am of the view that further delay would be a serious mistake. In addition to the vast productive benefits for small businesses, the opportunities for the government are clear, too: more accurate live data on what is going on in the real economy as well as being better able to track the small minority who make inaccurate declarations and ultimately close their tax gap.”

On LinkedIn, meanwhile, SJCM accountant Samantha Mitcham explored the different responses within the profession in a “Will they/won’t they?” post on LinkedIn.

Bookkeeper and payroll specialist Helen Armstrong commented: “When the aptly named [Administrative Burdens Advisory Board] recommend it be delayed, which they did in their latest report, I reckon it will be delayed.”

Stephen Leonard answered: “I suspect the reason for their request for the delay was because they don’t think HMRC are advanced enough in the process to give confidence that they will have a functioning system ready for 2024 (with all the subtleties and tricky situations that haven’t been explained)”

Replies (221)

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By norstar
19th Dec 2022 14:40

I'm not surprised, but I'm OUTRAGED. Once again, the prudent amongst us who put things in place, brief clients, plan etc, are todgered while the Ostriches will be fine.

Whoever oversaw this project should be sacked.

Wasted time. Wasted costs.

Make up your bl***y minds.

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Replying to norstar:
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By Ian McTernan CTA
19th Dec 2022 14:46

I've managed to keep my efforts in this regard to a minimum- mainly because it was clear this was like many other HMRC plans where so many things change it's not worth bothering clients with until a few weeks/months before the actual start date.

Putting systems and plans in place for a system that might never happen and if it does will be much changed isn't usually a great idea.

My main communication to clients was 'MTD might happen in April 2024 but it's unlikely, we'll review this late 2023 if you might be affected'.

I did spend an hour or two looking at various software options and had that ready to go....

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Replying to Ian McTernan CTA:
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By norstar
19th Dec 2022 15:12

I respectfully disagree, and strongly so. For me, leaving the onboarding of potentially 150 clients to "a few weeks" before the due date would be negligent. Our plan was to look at onboarding people in Feb/March 23 so that they had a full year under their belt before it kicked in.

It depends on what sort of business you are running, but there's no way we could cope with that many clients struggling to get up to MTD speed in that timescale. I just hope Xero honour their agreement that they would allow us to cancel bulk licenses acquired if HMRC u-turned.

Either way, HMRC did this before and it further erodes any trust or confidence people had in them. Just like Truss's position became untenable when she begain u-turning, this does the same.

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Replying to norstar:
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By jvenegas16
19th Dec 2022 19:12

There was going to be a year of soft landing anyway. No need to panic, as we have already gone through the pain of VAT MTD

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Replying to norstar:
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By jvenegas16
19th Dec 2022 19:12

There was going to be a year of soft landing anyway. No need to panic, as we have already gone through the pain of VAT MTD

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Chris M
By mr. mischief
19th Dec 2022 15:20

A sensible response to this load of drivel which is similar to mine.

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Replying to Ian McTernan CTA:
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By User deleted
19th Dec 2022 21:50

A very wise response to MTD and certainly not being an ostrich.

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Replying to norstar:
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By bendybod
19th Dec 2022 14:55

I used to be in the camp of the prudent but I got outraged sooner than you. I refuse to put any meaningful effort in to anything regarding HMRC or the Treasury more than 12 months out other than having conversations with any clients who might be very significantly affected. Even then, the conversations go "assuming that there are no further changes which, in our experience, there will be".

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By ollieacca
19th Dec 2022 15:27

A sensible approach! It felt like there was always a high chance this wasn't going to go through in its original form. Our office of sceptics had seen too many of HMRC's projects go this way. As I'm sure the figures show, forcing use of software does not improve record keeping/tax take, in many instances it goes the other way. Software can help a good bookkeeper/accountant, it doesn't make one!
It does feel like MTD the first time round when the only ones pushing are the software developers.

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Replying to bendybod:
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By Paul Crowley
19th Dec 2022 16:18

Same here
Been there before on MTD VAT
So many options became available for first filing day, that were not there before.
Spreadsheet options would not be viable being the message not just from software vendors, but expressed on CPD courses as well
I will cope with it on the day, as £50,000 makes the number of landlords nearly zero and traders that are not already organised or VAT registered trivial

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By Eddystone
20th Dec 2022 15:47

Yes, that £50k is a great improvement, as is the whole deferment. As one of the ostriches, thankfully I'd done very little about it anyway other than warn clients.

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Replying to norstar:
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By Open all hours
19th Dec 2022 15:20

Me too, OUTRAGED. The software companies greed and deceit. HMRC ignorance and drift. Professional bodies dereliction of duty. Those who have promoted it on here, gross naivety and complacency. Fulsome apologies needed from them all, and taxi for Mr Harra.

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Replying to Open all hours:
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By Ermintrude
19th Dec 2022 20:27

Agreed.

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Replying to norstar:
By ireallyshouldknowthisbut
19th Dec 2022 15:24

@norstart, really?

I don't see why those of my clients who are not on software (ie the ones for which it is not suitable) should be forced to do so, just to save your blushes.

My clients have been aware of the project, and also aware of the constant delays. It was a considered business decision on my part to do no more than advise clients to use a dedicated bank account and 'wait and see' what happens. That was not an ostrich position, but well considered based on the progress of the project (or lack thereof) and likelihood of this getting canned.

It looks like this is now well on the way to getting canned for the sub £30k turnover which really is the big news today, rather than the "yet another delay to add to the other delays".

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Replying to ireallyshouldknowthisbut:
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By norstar
19th Dec 2022 15:31

"I don't see why those of my clients who are not on software (ie the ones for which it is not suitable) should be forced to do so, just to save your blushes"

What a ridiculous comment. I don't see why they should be either, but they were being forced to do so by law, nothing to do with "my blushes".

I didn't see why clients should be forced to file 13 returns a year for RTI but they did. Nor MTD for VAT, but they did.

It's nothing to do with my blushes and everything to do with the fact that it's unacceptable that HMRC effectively give the profession a choice - gamble on something not happening and avoid spending time on it, or be prepared and risk wasting time if it doesn't happen.

Regardless of your view, we shouldn't have had to do that.

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Replying to norstar:
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By raju m
19th Dec 2022 15:47

spot on¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬

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A Putey FACA
By Arthur Putey
20th Dec 2022 13:09

Sorry but although you and others have taken a proactive approach to this, more fool you for believing that norwithstanding covid and all the other issues with government and HMRC that it would actually happen anytime soon. Those that chose to wait (ostriches as you call them) can carry on as normal not having wasted precious time and effort.

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Replying to norstar:
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By tracey2412
19th Dec 2022 15:43

@norstar Couldn't agree more.
Having decided in early 2020 that I no longer wanted to 'do' bookkeeping for ungrateful unappreciative clients who didnt want to pay what the work was worth, I took a break in 2020-2021 (thank you pandemic!) & for most of the last year have been slowly building a new brand, aimed at a very specific client base of self employed business owners who would come under MTD for ITSA & 2023 was to be the time to really push as the deadline loomed.
I have spent hours holding webinars, presentations, patiently answering questions, helping the clueless & scared, created courses & resources. What a waste of time.
This delay has totally blown my entire business plan for 2023 to pieces because no matter how much you try to persuade them that going digital (done right) makes it all so simple & easy & is less stress & up to date information is valuable when you make decisions about your business investment & growth, etc. blah blah, they just don't want to know. It was the mandatory requirement that was going to prove the pudding.
I know some will argue don't put all your eggs in one basket but this afternoon, I don't want really to hear it. I will lick my wounds for a few hours & then pick myself up & start again. Oh hum!

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Replying to norstar:
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By DMBAcc
19th Dec 2022 16:12

Hi DMBAcc,

The following reply has been Thanked by a member of the AccountingWEB community:

Hi Norstar - it seems you have many supporters here including me. Call me a luddite but I am one of those many accountants who look after the very small businesses of which this government (and many previous) care little about. For a very small fee it is easy for me to use the current agency arrangement and submit correct annual tax returns. I suspect many others will say the same. I am HONEST (although apparently along with many others like me the HMRC have accused of being dishonest by under reporting tax - which is still a criminal offence I believe) and I am ACCURATE along with many others like me. HMRC need to wake up and smell the coffee. Most businesses and their accountants WANT to pay their taxes so that we have some half decent public sector services. We do not shy away from our social responsibility and we RESENT being castigated as criminals without trial or jury. All we have ever wanted to do is to HELP the HMRC do their job as simply and as efficiently as possible. Sadly HMRC always think they know better even though none of them has ever run their own business nor tried to call HMRC on the phone. Of course, we needed HMRC to be honest from the outset if we were going to help. It started off badly and only got worse. To tell us that there would be so much benefit for small businesses in 2016 to now openly admitting that there WAS NO EVIDENCE for them to make such a statement and in point of fact it will COST small business significant amounts to implement BEGGARS belief. And STILL they want to rope us all in at some future (not defined) date. I shall be telling my clients NOT to waste any time nor money preparing for this contemptible LASHUP. I still think a total boycott on MTD for IT is the only way to get rid of the current incumbents and start again with some PRACTITIONERS on the development panel. Well that was pretty intense so I shall climb down off my soapbox and wish you all a very peaceful Christmas and HAPPY new year.

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Replying to norstar:
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By User deleted
19th Dec 2022 18:43

It's not being an ostrich. Common sense after the first delay.

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Replying to User deleted:
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By norstar
20th Dec 2022 10:22

It's "common sense" to ignore an imminent tax law change in the hope that it'll be delayed at the last minute? Sounds like a responsible business strategy.

No in fact it doesn't. Sounds like Ostriching and getting away with it this time.

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Replying to norstar:
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By NotAnAccountant2
20th Dec 2022 10:44

norstar wrote:

It's "common sense" to ignore an imminent tax law change in the hope that it'll be delayed at the last minute? Sounds like a responsible business strategy.

No in fact it doesn't. Sounds like Ostriching and getting away with it this time.

There was absolutely no way that MTD ITSA was going to go live in April 2024 without a VERY soft landing indeed, so soft that it wouldn't have hurt clients to only tell them once it had gone live. Absolute worst case would have been having to deal with clients getting a letter warning them that "they weren't compliant with MTD ITSA and needed to start quarterly reporting but no penalties would be issued" - I understand that dealing with clients who get "scary letters" from HMRC can be a significant time sink for accountants...

You had far, far, far more important "impending law change" things to worry about - what about sourcing computer parts (pretty much everything in fact) once CE marking was no longer sufficient to allow sale in GB (NI would still be OK)? That was only extended in November this year (from Jan 2023 to December 2024 so it's still more urgent than MTD). I presume you, and your clients, have also spent vast amounts of time on that too?

https://www.gov.uk/guidance/using-the-ukca-marking#full-publication-upda...

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By SXGuy
19th Dec 2022 14:41

So that's what, 9 years of delay now. Will it ever happen? Nice to see the threshold increase though.

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Replying to SXGuy:
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By Crouchy
19th Dec 2022 14:46

surely a 9 year delay has got to tell someone that the project isnt capable of doing what its meant to do

scrap it now and keep SA in place

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Replying to Crouchy:
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By raju m
19th Dec 2022 15:18

Totally agree with that. Raj Mehta

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Replying to SXGuy:
By ireallyshouldknowthisbut
19th Dec 2022 15:45

SXGuy wrote:

So that's what, 9 years of delay now. Will it ever happen? Nice to see the threshold increase though.

The threshold really is the biggest news here. It seems to be finally acknowledging that this project has the biggest impact on the smallest business for whom digitising goes from "pointless" to "actively time wasting".

It seems sub £30k are going to be dropped which is where 90% of the problems are, that said reporting quarterly is not going to do anything for larger businesses either, but will be more able to wear the time wasting.

What will be interesting to see in the next 3-4 years until this might or might not go live, is if they kill quarterly updates which really is the issue here.

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Replying to ireallyshouldknowthisbut:
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By SXGuy
19th Dec 2022 17:12

To be fair 30k or 50k threshold to quartly reporting is an additional service I wouldn't mind offering.

I was dreading it for my smaller clients as, it's just a pointless expensive exercise.

But with the higher threshold its almost justified.

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By JD
19th Dec 2022 14:43

Thank you, John

This is an excellent example of what is good about A.Web.

As others have noted, this agile (make it up as you go along approch) to development of anything, is very unfair to professional advisors and users a like.

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Replying to JD:
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By adjadj
19th Dec 2022 16:47

I have my last 4 years before retirement on three different agile projects.

The agile method as practiced by HMRC is not agile at all as there were so many missing elements like close working with stakeholders

We should not be criticising the agile methodology based on an HMRC screw-up. The screw-up is due to HMRC not the method they chose to try to use

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By stephenleonard
19th Dec 2022 14:43

Still think it is a poor decision to delay - interesting to see the minimum earnings level change and I think if they had just done that it would have been possible to continue and make a start in 2024 as it is the really small sole traders and landlords that are the more tricky situations to work round.

I suspect that in 2025 we will be having the same debates and calls for delays

At least we will all have something different to talk about at Accountex & Accountingweb.live in 2023

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Replying to stephenleonard:
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By philaccountant
19th Dec 2022 14:48

"Still think it is a poor decision to delay"

It doesn't work, probably never will do. That's why it's being delayed (not out of charity for accountants). Therefore releasing it broken would be a very bad decision.

The main question is: with the project now nearly a decade behind schedule, when will they bite the bullet and scrap it?

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Replying to philaccountant:
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By PChapman
19th Dec 2022 16:17

If IR35 is anything to go by they won't!
Just keep doggedly adding plasters

MTD for VAT has already shown there is no tangible benefit to the Gov't
and don't get me started on the abomination that is CGT for property!

My approach to clients is
1) Frankly I haven't got a clue what MTD for IT will look like, there are still too many unanswered questions for a meaningful implementation timeline.
2) Best practice is to set up a separate bank account for your business
3) I will help your business run more efficiently with the appropriate tools

Frankly (3) is the only think that will sell accounting tools to businesses. take their pain away, solve a problem.

As for increasing the tax take - just change the current regime to quarterly installments based on VAT returns, with a final return and balancing figure
oh and raise the threshold to that for VAT!

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Replying to stephenleonard:
By SteveHa
19th Dec 2022 15:03

I'd quite like to see two, three year delays back to back after this delay expires, by which time I'll have retired.

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Replying to stephenleonard:
By ireallyshouldknowthisbut
19th Dec 2022 15:26

@stephen, you cant launch a system which is not ready. HMRC are not even remotely ready. They have not answered key questions on how the thing is even supposed to work.

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By Matt1999
19th Dec 2022 14:44

Good.

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By Homeworker
19th Dec 2022 14:45

Wow! Excellent news. Shame it is too late for me to take back all of the clients I have passed on to a colleague in the meantime...

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Replying to Homeworker:
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By Open all hours
19th Dec 2022 14:57

Exactly. These shysters should compensate you.

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Replying to Homeworker:
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By User deleted
19th Dec 2022 18:45

Why did you? It has been delayed numerous times already

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Replying to User deleted:
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By Homeworker
20th Dec 2022 09:40

Only once actually, and they showed no signs of budging until recently. I was never going to get involved in quarterly accounting - too old now and don't have the resources or willpower. It was fairer to pass my clients on now to allow time for my colleague, who has taken them on, to get to know them before it happened.

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Replying to Homeworker:
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By User deleted
20th Dec 2022 13:05

It's been delayed more than once!

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Morph
By kevinringer
20th Dec 2022 13:25

This is at least the third time it has been delayed, possibly the fourth. I've lost count.

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By philaccountant
19th Dec 2022 14:45

Just kill it.

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By listerramjet
19th Dec 2022 14:47

Would make more sense to just cancel it. I am sure its aims are laudable, but it will never achieve them, even if they managed to ever get it live.

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Replying to listerramjet:
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By Jimess
19th Dec 2022 15:13

They are leaving that to whoever the next Government/Treasury team will be in place in 2026 - someone else's problem then.

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By petestar1969
19th Dec 2022 14:47

Woohoo! Would be better if they scrapped it altogether of course but this will do for now.

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By mikeyban
19th Dec 2022 14:47

Finally they are beginning to see what we have all known for some time. For goodness sake please just remove all this.

If they want quarterly payments then no problem. Paper bag clients will forever exist and if HMRC think otherwise then they are very very naïve.

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Replying to mikeyban:
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By raju m
19th Dec 2022 15:53

spot on¬

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By BryanS1958
19th Dec 2022 14:48

Luckily I'm an ostrich and broadly ignored it.

Two years will be coincidentally kicking the ball into Labour's court? Let them be the bad guys to introduce MTD ITSA.

And, of course, yet more random numbers for businesses and the accountancy profession to have to track. Why £30k and £50k?

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Replying to BryanS1958:
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By Jimess
19th Dec 2022 15:45

Probably an attempt to sweeten the pill for the software houses, their market expansion was most likely planned around the the untouched market of smaller traders and landlords. The market for traders above the VAT registration limit will have been soaked up when MTD for VAT was introduced and it would be a far less lucrative prospect to try to increase their monthly fees for the addition of MTD for ITSA to customers that already use their products. They will be aiming at a relatively untouched part of the market mainly made up of very small traders and landlords that had never had the need for involvement with software for accounting purposes beyond a simple spreadsheet before MTD for ITSA came along. The CEO's of software houses will be crying in their beers this Christmas.

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By Ben Alligin
19th Dec 2022 14:48

Xmas has indeed come early. Power to the ostriches or realists, take your pick.

However having engaged in the debacle of MTD-VAT early I learnt my lesson. Those with a more shallow learning curve can hardly blame the ostriches for enjoying our moment in the sunshine.

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