Agents concerned about MTD despite HMRC concessions

The Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) have published the results of their recent member survey about Making Tax Digital (MTD). It shows that members have continuing concerns about the costs and benefits of MTD for Income Tax despite the increased thresholds and delayed start announced by HMRC in December 2022.

Of the 517 professionals who responded to the survey:

• 70% felt that the proposed new start date for MTD for income tax of April 2026 was still too soon.
• The increase in the thresholds for when taxpayers are mandated to join MTD for income tax was greeted with increased optimism by 36% of respondents, though 43% were indifferent to this change.
• There was a strong response to the concept of MTD for Income Tax being mandated for the self-employed and landlords with income below the £30,000 threshold. 75% of respondents were greatly opposed to the idea, whilst 87% felt that quarterly reporting would be of no use to businesses at this income level.
• The majority felt that less than 10% of their self-employed and landlord clients would be likely to use an additional agent to help with MTD for Income Tax. Where this was likely 80% foresaw problems with another agent being involved.
• Finally, whilst 56% of those surveyed felt that the proposals for MTD for Income Tax had significantly affected their trust in the tax system, the overall response to how it had gone with reporting under Making Tax Digital for VAT was more positive than not, though 81% of respondents felt that the new system had done nothing to improve the accuracy of VAT returns.

The overall sentiment from those professionals who participated in the survey was that HMRC’s current approach needs a major re-think, that there are other areas that HMRC should prioritise over MTD for Income Tax, such as their service levels, and that it is unlikely to help with closing the tax gap.

Respondents pointed out that the change to quarterly reporting for VAT was less of an adjustment than it will be for Income Tax as VAT was already a quarterly reporting tax with much fewer adjustments required than for Income Tax calculations. As a result, professionals expect the move to MTD for Income Tax to be much more challenging than it has been for VAT.

Interestingly 486 of the survey respondents had not participated in HMRC’s now-closed MTD for Income Tax pilot which perhaps indicates the profession’s overall lack of engagement with the proposed changes here.

Useful guides on this topic

MTD: Toolkit for accountants
What is the current timetable for Making Tax Digital (MTD)? How will it work? Which clients will be excluded? What planning needs to be undertaken?  

Making Tax Digital: Survival guide (for the self-employed & landlords)
The way that some self-employed taxpayers report their business profits to HMRC is set to change under the Making Tax Digital (MTD) for the business regime when it begins to apply to Income Tax reporting.

Making Tax Digital: VAT (subscriber guide)
What is Making Tax Digital for VAT? What is VAT 'functional compatible' software? What do you need to do to report your VAT? Are there penalties for making mistakes?  

External link

CIOT: Making Tax Digital – our survey says