Delay to Making Tax Digital for Income Tax Self-Assessment ‘should trigger HMRC to review and rethink’

Accountants to contractors are backing the government’s December 19th decision to delay Making Tax Digital for Income Tax Self-Assessment until April 2026.

The backing from firms like Tax Ninja and Jenner & Co, represents a rare show of support for a government tax decision, particularly a government decision made so near to Christmas. But both firms say their hope now is for a rethink about MTD ITSA, generally and specifically, beyond ministers now twice delaying it (initially the launch was April 2023).

The general rethink of the scheme is required because MTD ITSA is “based on policy decisions made around seven years ago,” scorns contractor accountant James Trowell. “It’s been such a long time [from inception of the scheme until now that] the economic landscape has changed entirely,” Trowell, boss at Tax Ninja. He added: “The delay in MTD ITSA is the right move. Fundamentally, HMRC should review thoroughly and rethink. I mean; is quarterly reporting even still the best way forward?” The government says MTD ITSA is being delayed because the scheme represents a “significant change to taxpayers” who are in a “challenging economic environment.”

Chief executive officer at Bright Software Group, Kevin McCallum says that ideally, HMRC will use the extra time granted by the delay to “assess the entire MTD ITSA process”. McCallum urged the Revenue to “identify areas which can be simplified.” While taking to LinkedIn “For example, the existing self-assessment return is already submitted digitally, so a solution which links quarterly reporting into that return without reinventing the finalisation in January would mean taxpayers keep digital records and provide income and expenditure data early, without the upheaval of EOPS and crystallisation statements.”

Joanne Thorne, technical compliance manager at SJD Accountancy said, “if they prepare now, contractors operating through their own limited company can do their bit to ensure the “transition to MTD is as seamless as it can be.” Yet she hinted some contractors might be not overjoyed at having to wait for another three years to get a digital tax account, partly because of what they’ve been through already. “The delay to MTD ITSA…follows a turbulent year for contractors, with dangled cherries [relating to IR35], Mini-Budgets and Autumn Statements,” the SJD manager said. “So, this delay may cause feelings of further uncertainty. Indeed, it might even be hard for some to trust that we won’t see any more changes — or delays — to the introduction of MTD ITSA.”

HMRC chief executive Jim Harra said: “HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.”

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