Milsted Langdon’s business innovation team partner & head, Sarah Jenkins, has said the recommendations put forward by the Institute of Chartered Accountants in England and Wales (ICAEW) to review the implementation of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) should be heeded by HM Revenue & Customs (HMRC).
The Government launched a review of MTD ITSA back in December 2022 alongside its delay to this landmark change in the record keeping and reporting of tax for certain Self-Assessment taxpayers.
HMRC’s findings of this review and its recommendations are expected to be released in June. During this process, the tax authority has engaged with many stakeholders, including the ICAEW’s Tax Faculty. As a result of these meetings, the ICAEW recommends that:
- The review gives an opportunity for fresh thinking on MTD ITSA policy.
- This fresh thinking needs to be applied to all taxpayers, not just those with turnover below £30,000.
- The project should be refocused on what can realistically be delivered in 2026, and on digital record keeping and filing from software.
- The administrative burden associated with quarterly updates is disproportionate and needs a rethink.
- The requirements to maintain digital records and to submit details of income from self-employment and property directly from software could be decoupled from quarterly updates, with the current annual reporting cycle being maintained.
Having reflected on these recommendations, Jenkins said: “The ICAEW has listened to the needs of accountants and the clients that they represent in producing a set of sensible suggestions.
“The burden on taxpayers is going to be considerable, and even with the integration of cloud accounting and automation, there are going to be many who are left behind.
“While we have taken bold steps to help our clients prepare, there are still many taxpayers out there who are not prepared for this change and who are likely to remain unprepared for some time.
“The expectations of MTD ITSA are considerable for the average self-assessment taxpayer and so there needs to be a phased approach to quarterly reporting that gives these people enough time to prepare themselves.
“In the meantime, we are driving more and more taxpayers to take up cloud accounting so that they are properly prepared for this change.
“However, a greater degree of certainty around the launch of MTD for ITSA and expectations would certainly help us and many within our profession as we educate and support our clients.”