Sole traders and individuals with income from a property business were expected to be brought into MTD for ITSA from 6 April 2023. However, they will now be mandated from 6 April 2024.
General partnerships were also expected to be in MTD for ITSA from 6 April 2023, however they will now be mandated from 6 April 2025.
The NFU backs delay
The NFU has welcomed these delays, having long argued that more time will be needed. We remain concerned over the potential cost and burden of reporting for diversified farm businesses and will be carefully studying the newly published regulations. The NFU will take this further time to engage with HMRC. We will also seek to engage fully with the pilot stage ahead of the mandation dates.
The NFU believes it is essential that HMRC and software providers use the data and experiences from the pilot stage to ensure a successful outcome when businesses are mandated. This will be critical if Making Tax Digital for Income Tax is to deliver benefits to both businesses and government.
The postponement has been explained in a written ministerial statement from the new Financial Secretary to the Treasury, Lucy Frazer: “HMRC has worked closely with partners in the business and tax communities on the proposed design and scope of MTD for Income Tax (ITSA).
Today, the government has laid regulations in Parliament to help those impacted by the changes to prepare, and for their representatives to develop their own support and guidance.
Postponement follows feedback
“The government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the last year. In recognition of this and of stakeholder feedback, we will now be introducing MTD for ITSA a year later, in the tax year beginning in April 2024.
“General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025. The date at which all other types of partnerships will be required to join will be confirmed later.
“In March 2020, the government announced a new system of penalties for the late filing and late payment of tax for ITSA. This will now be introduced for those who are mandated for MTD for ITSA in the tax year beginning in April 2024, and for all other ITSA customers in the tax year beginning in April 2025.
“Alongside the Regulations, HMRC has also today published a Tax Information and Impact Note (TIIN) setting out the projected benefit and cost impacts of MTD for ITSA, as well as a policy paper to help different businesses understand what their transition to MTD could look like in more detail.
More time
“A later start for MTD for ITSA provides more time for those required to join to make the necessary preparations and for HMRC to deliver the most robust service possible, affording additional time for testing in the pilot.
“HMRC will continue to work in close partnership with business and accountancy representative bodies and software developers to ensure taxpayers are well supported as they adopt MTD for ITSA.
“The government has also recently consulted on a reform of the complex basis period rules that govern how self-employed profits are allocated to tax years. Many respondents said that the reform was a sensible simplification but asked for more time to implement the changes. In recognition of these concerns, these changes will not come into effect before April 2024, with a transition year not coming into effect earlier than 2023.
The government will respond to the consultation in due course providing the next steps.”