HMRC delayed Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) but encouraged sole traders and landlords to get ready by joining the pilot. It’s now back pedalling on this. What’s the full story?
MTD timetable
In December 2022 HMRC conceded to pressure and pushed back the start date for MTD ITSA to 2026. At the same time it announced changes regarding which businesses will be required to use it when it finally arrives. Despite this, HMRC encouraged joining the MTD ITSA pilot in preparation. However, problems with this have resulted in a further setback.
Poor take-up
Initially there was some enthusiasm in the pilot from accountants but lack of compatible software made it difficult to use. This is still an issue, although relatively recently big players such as Xero, Sage, IRIS and QuickBooks have joined the small club of software providers. The conditions clients must meet to use the pilot were also a barrier, and there were teething problems with the system which forced HMRC to remove hundreds of users.
Relaxed conditions
In mid-2022 HMRC relaxed the conditions for joining the pilot. This seemed to signal that at last HMRC was ready and able to expand its use. However, that hasn’t proved the case. In February 2023 HMRC closed it to new users because of further problems. At the time the number of users had dwindled to a staggering low of just nine.
What next?
Currently the pilot is still closed to new entrants with no indication of when it will reopen. Clearly, there are issues which must be fully resolved and not just patched up before HMRC can relaunch. We’ll keep you informed of progress on this as it happens. Tip. MTD ITSA is inevitable and so our view is that generally you should get on board as early as possible so that you’re well prepared for when the rules finally bite. However, the pilot has been a disaster by most measures and confidence in it being able to deliver when it reopens is low. For that reason we suggest you hold off joining until the pilot has been successfully operating for a few months.
As at March 2023 the MTD ITSA pilot is closed to new entrants because of technical problems. When it reopens we recommend not joining until it’s been successfully operating for a few months.
The next step
Software that’s compatible with Making Tax Digital for Income Tax.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.