MTD for Income Tax delayed a year as pandemic and ‘feedback’ cited

What will accountants think about Making Tax Digital being put on ice?

There seemed to be only one likely outcome for the introduction of MTD for Income Tax, given the gargantuan task of educating millions of businesses that loomed in front of the Government and accountants across the land.

And today it was confirmed; the start date for this enormous change to tax legislation is to be delayed.

As the news trickled through, I could hear the sighs of relief from accountants from Inverness to Land’s End.

It’s a bit of history repeated, with echoes of the delays from the first phase of MTD three years ago.

Yet, this was a more obvious decision to take, arguably, bearing in mind this change is vastly more complex. And not just for business and accountants, but for HMRC too.

Why? Not least the move from one annual submission to four quarterly updates, followed by final adjustments and submission. And the differences in timings for reporting for VAT periods and Income Tax periods. I suspect these particular complexities played a key part in the decision.

The apparent lack of knowledge and understanding about MTD among smaller businesses has been evidenced in various surveys, such as accounting Firm Mazuma’s, which uncovered that 83% of Plumbers are not ready.

So, I’m not surprised about this announcement and I think it is a sensible decision.

What was announced today?

MTD for Self-employed and Landlords

• Open Pilot still to start in April 2022
• Mandate delayed until April 2024

MTD for General (Simple) Partnerships

• Delayed until April 2025
• No pilot plans for Partnerships

MTD for all other Partnership types

• Delayed until after April 2025 no definite date provided

MTD for Corporation Tax

• No dates confirmed, likely to be after April 2026, but before April 2030

Why is it delayed?

The “challenges faced by many UK businesses and their representatives as the country emerges from the pandemic” and “stakeholder feedback” were cited by Lucy Frazer, the Financial Secretary (HM Treasury).

The delay “provides more time for those required to join to make the necessary preparations and for HMRC to deliver the most robust service possible, affording additional time for testing in the pilot,” she added.

What do others say?

Rebecca Bennyworth, an ex-Chair of ICAEW Tax Faculty, said accountants should not let up in preparations but added the delay gives “time to get lots of clients into the pilot and really be ready for the mandatory start date.”

Oxford Tax Professor Judith Freedman said: “Many people will be relieved by deferral of MTD for ITSA , but this does show just how hard it is to reform tax administration, since other changes must await this one. We need to be thinking now about 20 years hence, not just 10.”

What else was announced by HMRC?

• The projected benefit and cost impacts of MTD for ITSA (in a Tax Information and Impact Note)
• A Policy Paper to help different businesses understand what their transition to MTD could look like in more detail
• A delay to April 2024 for reforms of the “complex basis period rules that govern how self-employed profits are allocated to tax years”

What next?

I and our team of experts will keep a close eye on developments to see what other details emerge. This is certainly the time to think ahead and make the best out of the extra time.

In the meantime, join the discussion with me on LinkedIn.