ICAEW calls MTD quarterly reporting “disproportionate”

The Institute of Chartered Accountants for England and Wales (ICAEW) is urging HMRC to rethink the quarterly reporting model for Making Tax Digital for income tax self-assessment (MTD for ITSA).

In a letter to HMRC, the representative body is asking the Government to review the quarterly reporting process for the upcoming extension of MTD. According to the ICAEW, the change from annual reporting is “burdensome and not justifiable”.

While the ICAEW is “wholly supportive of the digitalisation of businesses and practices”, it criticises the reporting proposals, saying these will increase administrative costs for smaller businesses.

“Even when a taxpayer is maintaining digital records on a regular basis, having to ensure that these records are complete and checked by specific quarterly deadlines adds extra compliance burdens, especially where a bookkeeper or agent is involved, as we expect in the majority of cases,” ICAEW said.

There are hopes that the delay of MTD for ITSA until 2026 will give HMRC more time to analyse any feedback and consider further suggestions on the scheme.

In its letter to HMRC, the ICAEW added:

“‘MTD ITSA has become mired in controversy, the credibility of the project and the ‘MTD brand’ has been severely, if not irretrievably, undermined.

“To maximise support by business, the project needs a rethink and a rebrand, focused on the original aims, namely to deliver productivity benefits from the adoption of software and digital record keeping, and making it simpler for taxpayers to comply with their tax obligations.”

As well as the delay to the scheme’s rollout, HMRC has also paused the MTD for ITSA pilot scheme.

According to a Freedom of Information request, there were only 115 participants in the trial as of the start of 2023. HMRC has confirmed it will announce a revised testing stage to reflect the delays in the scheme’s launch.

For further information on MTD, please contact Andrew Kershaw on 023 8046 1258.