ICAEW has responded to a consultation on the draft tertiary legislation for Making Tax Digital for income tax self assessment (MTD ITSA). The draft MTD ITSA notices are very limited in scope and do not differ significantly from the drafts published in 2017.
The notices supplement the MTD ITSA secondary legislation (regulations) published in September 2021. They need to be supplemented by guidance.
ICAEW’s Tax Faculty understands that guidance will not be available for some time. Without this additional guidance, all the notices offer is some clarity over the transaction categories that must be used for MTD ITSA and the continuation of the ‘three-line accounts’ relaxation.
Some of the more fundamental issues with MTD ITSA that need to be resolved include:
- the need for multiple agent functionality;
- the design for businesses that have accounting dates that do not fall between 31 March and 5 April;
- the design for income from jointly owned property;
- the design for making adjustments and corrections, and exactly how the quarterly updates, annual adjustments, end of period statement and final declaration fit together in practice; and
- whether HMRC, software developers, taxpayers and agents have the capacity to deliver MTD ITSA to the current timeline, given the limited nature of the pilot, lack of awareness and resistance to the additional cost involved.
ICAEW’s Tax Faculty continues to have intensive engagement with HMRC’s MTD team concerning these issues.
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