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.
- Read the FST letter to professional bodies on MTD ITSA and basis period reform.
- “Speed of basis period reform risks integrity of tax system” (Tax News, 19 Aug 2021)
- “MTD ITSA and basis period reform postponed” (Tax News, 23 Sep 2021)
- “Drop proposed basis period reform, urges ICAEW” (Tax News, 31 Aug 2021)
Free webinar on MTD ITSA
The Tax Faculty are providing a back-to-basics and myth-busting analysis of Making Tax Digital for income tax self assessment which is set to launch in April 2024. Join Anita Monteith and Caroline Miskin to find out everything you need to know.
ICAEW Know-How from the Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.