HMRC takes the handbrake off MTD ITSA pilotby
From July 2022, the criteria for joining the Making Tax Digital for income tax self assessment scheme will be expanded, allowing more taxpayers to potentially participate. However, questions remain over the removal of remaining restrictions and the availability of software.
In an update shared with tax agents this morning, HMRC has announced that from July 2022 taxpayers with the following income types will be able to join the Making Tax Digital for income tax self assessment (MTD ITSA) pilot scheme:
- self-employment (including multiple self-employments)
- UK property
- Gift Aid
- Pay As You Earn income, including employment income and occupational pensions (excluding those with a coded out liability)
- UK interest
- UK dividends.
Clients will need to have an accounting period that aligns to the tax year (6 April to 5 April) to join the 2022–23 pilot and have MTD-compatible software before signing up. More information on the eligibility criteria can be found on HMRC’s guidance pages.
HMRC stated it will be testing the first quarterly submission for taxpayers already in the scheme from 6 July, after which it aims to open up the pilot more widely to those with income types listed above.
According to today’s communication to agents, HMRC would like to encourage more agents to start signing up a small number of their clients. “If you are interested in joining, we suggest you review your client list now and see who is likely to be eligible based on the criteria,” stated the update.
It added that those taking part in the pilot scheme “will have the benefit of testing MTD ITSA before 2024, including their own processes for managing MTD”.
Those interested in joining the pilot can contact their software developer or email HMRC on [email protected] for information on how to sign up. A full list of government-approved software providers can be found here.
MTD ITSA is due to go fully live on 6 April 2024 for all businesses with annual income from self-employment or property above £10,000, after the government postponed mandation of the scheme by a year in September 2021. General partnerships are currently due to be mandated into MTD ITSA from 6 April 2025.
Questions remain over rollout and roadmap
HMRC has previously stated a desire to limit income tax pilot numbers to provide “additional support to the first customers in the service before testing at scale”. However, the Revenue came in for criticism earlier this year when the figure for pilot participants dropped to nine, with tax professionals and technical specialists expressing concern that the current timeline will not allow for a large-scale “full cycle” run of the scheme before mandation.
Meanwhile, more general practitioners have queried the volume of participants taking part in the pilot. In a recent MTD ITSA webinar hosted by AccountingWEB, a poll of almost 100 accountants were asked how many people they thought needed to go through the pilot in order for it to be a success. Almost half (48%) said that more than 400,000 taxpayers, or more than 10% of those potentially affected by MTD ITSA, should have taken part before the scheme is mandated. A further 39% said they would not be participating until they were sure the pilot scheme was fully functional.
As is often the case with MTD ITSA updates, the communication raises several follow-up questions that AccountingWEB will seek to answer in discussion with HMRC.
When will a roadmap covering which restrictions will be taken off and when be published? For accountants, the majority of self assessment clients are likely to have 31 March year ends so will be unable to join at the present time. So when will they be able to join?
There still appears to be only three providers of software approved and available now on its list of providers, with a further 18 listed as in development. Will more vendors be coming online soon, or if taxpayers wish to participate in the pilot at this stage, will they have to move data to one of the approved providers?
If you would like to add to this list, please do so via the comments section below, by private message on the site or by emailing [email protected].
Join AccountingWEB editor at large John Stokdyk and industry experts at 11am on Thursday 16 June for a webinar on how accountants are facing up to MTD ITSA and the unanswered questions. Click here to register or for more information.