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MTD ITSA deferment provides more time to prepare, says FST


Published: 28 Sep 2021 Update History

The new Financial Secretary to the Treasury has confirmed that the decision to postpone the introduction of Making Tax Digital for income tax was made in recognition of the time needed for taxpayers, agents and HMRC to prepare for changes.

Responding to a letter from professional bodies, including ICAEW, which raised significant concerns over the proposed timetable for the expansion of Making Tax Digital (MTD) and basis period reform, the Financial Secretary to the Treasury (FST) acknowledged the challenges posed by the changes.

In a letter to the bodies Lucy Frazer, who was appointed as FST on 10 September 2021, wrote: “My intent is that introducing MTD [for income tax self assessment] in 2024 would provide those within scope, plus agents and intermediaries, more time to make the necessary preparations for their transition to MTD.

“It will also allow HMRC to deliver the best service possible, affording more time for testing of the service with a range of customers in the pilot and to further develop enhancements to the customer experience.”

ICAEW has welcomed the clarity on the timing and phasing of the introduction on MTD for income tax self assessment (MTD ITSA) and urges businesses and practitioners to use the additional time wisely to plan for the change.

Frazer also wrote that reaction to proposed reform to basis periods has been broadly positive, describing the reforms as “a sensible simplification”, but consensus was that more time was needed to implement the changes, which is why the basis period reforms will not be introduced before April 2024.

ICAEW, however, remains unconvinced on the basis period proposals warning in its consultation response that they are likely to “increase costs, complexity and uncertainty for those businesses affected and could damage the UK’s attractiveness as a place for the location of international service firms”.

Frazer confirmed that the government will respond to the basis period consultation and outline next steps in due course.

The Tax Faculty will be hosting a free webinar on MTD ITSA on 30 November 2021 to cover the regulations in detail and explain where we are with the development of the policy and the pilot and what taxpayers and agents can do to prepare. Book to attend.

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Free webinar on MTD ITSA

Making Tax Digital income tax self assessment (MTD ITSA) is scheduled to start from April 2026. The outcome of the policy review for small businesses was announced in November 2023 and amended regulations were laid before parliament in February 2024. HMRC is launching a private beta pilot for 2024/25, starting in April. Join the tax team for the latest information, including the pros and cons of joining the pilot.

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