ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Charities
    5. Coronavirus
    6. Corporate and financial reporting
    7. Business and governance
    8. Ethics
    9. Insolvency
    10. ICAS Research
    11. Pensions
    12. Practice
    13. Public sector
    14. Sustainability
    15. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

MTD ITSA: What you need to do now

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)

16 September 2021

Main points:

  • Getting ready for MTD ITSA - what you can do now.
  • Clarity needed on timetable for change.
  • Contingency planning starts now.

There's recently been a buzz of conversation within the tax community about Making Tax Digital for Income Tax Self Assessment (MTD ITSA). What is going on and what do you need to do now?

Back to the beginning

Starting life as Making Tax Easier in 2015, MTD ITSA has been on the agenda for a long while. It was due to come in before MTD for VAT, but was pulled at the last minute. So where are we now?

A new timeline

The welcome announcement on 23 September of a 12 month delay to the main ITSA start date, resets the clock, but doesn’t; change the direction of travel.

We have more certainty over MTD ITSA, but no firm commitment on basis period reform, except that, if it happens, it will also be delayed 12 months from the original suggested date.

Basis period reform logically, would  precede quarterly reporting under MTD ITSA. Otherwise calculating tax bills will be exceedingly complex for many represented taxpayers. An announcement is expected in / by Budget day, but legislation here would be expected in the next Finance Act.

The legislation for MTD ITSA is in place and a revised Statutory Instrument has now been published. There is also information on the HMRC developer Hub service guide.

But even this isn’t the end of the story. There is software to consider. And the ITSA pilot.

Software and the ITSA pilot

At the time of writing, there are just seven software firms listed as having software compatible with MTD ITSA. Many of the software firms used by accounting firms aren’t on the list yet. No doubt the key players will get there in due course. But not for now.

So, for many firms, even apart from the exclusions list - such as businesses who claimed coronavirus support under SEISS or CJRS during 2021/22, those with multiple businesses, those with tax debts - signing clients up right away isn’t an option.

It is still worth looking at the published guidelines for the ITSA pilot, and the information on signing clients up for MTD ITSA. Solutions are changing all the time, and it is likely that it may be possible to sign clients up in advance. But it is unlikely that a bulk sign-up solution will be available.

What to do now

While the detail is still unclear, the direction of travel is pretty much assured.

At some stage soon, unincorporated businesses with trading turnover or property income of over £10,000, subject to minimal exceptions, will need to submit quarterly returns of income and expenses. They will need to keep digital records and seamlessly make submissions without manual intervention. In due course, it is very likely that they will also need to make quarterly payments of income tax.

Are your clients ready? As a very first step, is their record keeping a completely digital journey and how do they intend to make quarterly submissions? Will they need your help?

Basis period reform

The other key question relates to basis period reform. If this goes ahead, having a year end other than 31 March / 5 April will mean additional administration for tax on an ongoing basis. On the revised timetable this would not be before 2024/25.

At the very least, this additional work will involve apportionment of accounts to match the tax year for the annual tax return. This will be necessary even if the end of year return morphs into a ‘crystalisation’ statement under quarterly reporting.

What will this mean for you? Will clients shift to 31 March year ends? What could the impact be for workflow? Contingency planning is what is needed here.

The rules haven’t been set in stone, though change is very likely. 2023/24 is now expected to be a transitional year, when clients with non 31 March / 5 April year ends could be hit with additional tax bills, as ‘tax year basis’ assessment replaces ‘current year basis’ assessment.

The other side of the coin is that overlap relief would disappear on 5 April 2024, so changing a businesses’ accounting date from 6 April 2023 onwards comes without fewer tax complications.

Even if the main basis period reform is delayed, there is a separate consideration of treating 31 March and 5 April as equivalent. In summary, 31 March is looking like a good choice of year end for MTD ITSA and the consequences form workflow management need to be assessed.

Take care what you read

Given the overall level of uncertainty and change, it is important to stress that much of the information on the web is not the final answer. This includes the information on Gov.uk.

The section who can follow the rules for MTD ITSA, still says (at time of writing) ‘you must follow the rules for your next accounting period that starts on or after 6 April 2023, if your taxable turnover from your self-employed business or income from property is above £10,000’. But it is not at all clear, following basis period reform, that this will indeed be so. It is not inconceivable that all businesses will join MTD ITSA at the same time, whatever their accounting date. We await confirmation.

The need for resourcing

ICAS and other professional bodies, recently sent a joint letter to the Financial Secretary to the Treasury outlining concerns about HMRC resourcing, and the impact on businesses and professional firms of the current proposals. This covered the interaction of MTD ITSA and basis period reform. The letter calls for an urgent review of the timetable for change. While we await an answer, it is clear that if reform proceeds on the current timeframe, it will be challenging.

Conclusion

MTD ITSA has been under discussion for a long while and we are entering a period where critical decisions are being made. Greater clarity should come over the next few months, but it is unlikely that every ‘I’ will be dotted and every ‘t’ crossed until much nearer the go live date.

At the moment, it is a case of wait and see, but also a time to make sure that businesses and professional firms assess likely outcomes, and take the basic planning steps to be as ready as possible when change comes.

Raise your concerns with us at tax@icas.com.

Estimating figures: The new normal for tax

By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)

2 September 2021

First thoughts on basis period reform

By ICAS Tax team

19 August 2021

2022-01-xero 2022-01-xero
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: