While many in the accounting sector have welcomed the year-long delay to the introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), HMRC is being urged to reassess the initiative and how it will impact smaller accounting firms.
Accountancy body, ACCA, said it still had concerns over the impact the initiative will have on smaller accounting firms. Head of Policy Glenn Collins said: “Our concerns regarding workload impact on small businesses and accountants due to MTD are still valid.
“There remain concerns around the levels of support required by SMEs and the ability of small accountancy practices to meet the workflow needs of regular reporting, unmanageable software costs and the low threshold for reporting under MTD for ITSA, which will bring a significant new cohort of SMEs under MTD requirements.
HMRC could create a ‘bottleneck’ around deadlines
“In particular, the level of detail HMRC requires as part of MTD quarterly reporting, could create a ‘bottleneck’ around deadlines as well as unmanageable workloads for accountants and small businesses. This could seriously affect broader compliance and late filing rates.”
He added: “Over the next 12 months, we would like to see HMRC use this time to reassess its proposal carefully in order to reduce the burden placed on businesses and accountants.”
Delay gives HMRC ‘fighting chance’ of achieving MTD aims
Alison Hobbs, Chair of the joint CIOT and ATT Digitalisation and Agent Services Committee, said the 12-month delay was welcome as it “gives HMRC a fighting chance of achieving the goals of MTD while limiting the confusion and costs for individuals who are reeling from the impact of the pandemic and, for some, the consequences of Brexit.”
She added: “There is now more time to sort out problems and get software products tested, for example, but HMRC must make full use of this extra year. They must also undertake a significant communications and educational exercise to try to ensure all affected taxpayers are aware of their obligations and how to comply with them in time. Our tax adviser members report that it has been difficult to get clients engaged with MTD for ITSA because of uncertainty with the project up to now.
“We now need to see a marked increase in the number of taxpayers taking part in the pilot, as well as an increase in the number of software products available.”
But now is not the time to slow down
Kevin Sefton, CEO of untied, the personal tax app, said: “HMRC’s own figures indicate that more than four million people will be affected by Making Tax Digital for Income Tax Self Assessment. It’s the biggest change in personal tax since the implementation of self-assessment a quarter of a century ago.
“This delay allows everyone more time to ensure that the implementation of Making Tax Digital is smooth and a success. This is not a time though to slow down – much needs to be put in place, and we would be keen to see HMRC keep to the original timetable for testing in order to embed MTD ITSA processes.
“Taxpayers will be expected to put significant trust in the software that is being used for MTD ITSA. We note that the software requirements still are focused on functional compatibility and do not refer to quality or security. We consider these to be essential criteria to be addressed in conditions that HMRC will be setting out.”
Deferral not welcomed across the board
However, Simon Chaplin, MD of Peterborough-based accountants GreenStones, did not welcome the announcement. He said: “I can’t believe how ‘celebratory’ the accounting profession has been around MTD being delayed. Unfortunately, it will slow the progression of the profession down and mean that clients continue to receive outdated information on which to base their financial decisions.”
MTD for ITSA will be mandated for businesses and landlords with a business income over £10,000 a year in the tax year beginning in April 2024.
General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join has yet to be confirmed.
A spokesman for HMRC said: “HMRC will continue to work in close partnership with business and accountancy representative bodies and software developers to ensure taxpayers are well supported as they adopt MTD for ITSA.”