The International Association of Bookkeepers has reported on the government’s recent decision to delay the introduction of Making Tax Digital [MTD] for Income Tax Self-Assessment [ITSA] until 2024, saying that it gives firms an additional 12 months to prepare for the impending changes.
In a written statement to the House of Commons on September 23, 2021, it was announced that the start of MTD ITSA would be postponed until the tax year starting April 6, 2024, with MTD for general partnerships postponed to the tax year starting in April 2025.
It is the latest in a string of delays and deferrals in the MTD programme, which was first proposed back in 2015 by then chancellor, George Osborne.
Financial secretary, Lucy Frazer, said: “We recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so. We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st Century.”
Echoing the financial secretary’s words, HMRC has said that it recognises the challenges thrust upon businesses in the current climate and has taken stakeholder feedback on board ahead of taking the decision to delay.
A spokesperson 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.”
MTD for ITSA will now become mandatory for businesses and landlords with a business income of over £10,000 per year in the tax year beginning in April 2024.
In March 2021, the government announced a new system of penalties for late filing and late payment of tax for ITSA. The new penalties for individuals mandated for MTD for ITSA will be implemented from the tax year starting in April 2024 and the tax year beginning in April 2025 for all other ITSA taxpayers.
As of yet there is no indication as to when other more complex partnerships may be required to join MTD, and it is unknown whether the MTD for corporation tax project will start as planned in 2026 or face delays.
Furthermore, following the July 2021 launching of government consultation on changing to the tax year basis of assessment, Frazer’s written statement to the Treasury confirms that the change to the tax year basis will not come into force before April 2024, with a transition year to come no sooner than 2023.
The consultation over the possibility of changing to the tax year basis of assessment had raised concerns over whether there was enough time to introduce such a significant change to tax law before MTD ITSA came into effect.
Meanwhile, using the tax year basis would also bring forward the start of MTD ITSA for businesses with a March 31 year end, from April 1, 2024, to April 6, 2023, a prospect which would require a great deal of transition for many business owners and accountants.
