The recent amendments to Making Tax Digital for Income Tax and Self Assessments (MTD ITSA) are facing ongoing scrutiny and concern:

The government has introduced regulations (SI 2024/167) that confirm the latest schedule for Making Tax Digital Income Tax Self Assessment (MTD ITSA). Additionally, a notice outlining the contents of quarterly updates has been issued, with further notices addressing software and joint property owners to follow at a later stage.

These regulations not only adjust the commencement date but also integrate changes announced in December 2022 and during the Autumn Statement 2023 following a review of small businesses.

The Tax Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW) responded to a consultation on the draft regulations through ICAEW REP 08/24. The primary amendment introduced by the final regulations is shifting the submission deadline for MTD ITSA quarterly updates to the seventh of the month, aligning it with the VAT deadline (previously the fifth of the month).

Despite these developments, uncertainties persist regarding the requirements for maintaining digital records, including the necessary level of detail, and the practical implications of the requirement for digital links within functional compatible software.

ICAEW continues to harbour broader concerns about MTD ITSA, encompassing the administrative burden and complexity arising from quarterly submissions, unresolved design and implementation issues, doubts about the feasibility of a meaningful pilot by 2025/26 preceding the April 2026 commencement, HMRC’s capability to provide necessary customer support, the availability of suitable software products (including those meeting the government’s commitment to free products), and the practical application of the late submission penalty regime. These concerns were partly echoed in the report on MTD by the Public Accounts Committee (PAC), to which the government has now responded.

Caroline Miskin, Senior Technical Manager at ICAEW Tax Faculty, expresses disappointment with the government’s response to PAC, stating, “The government responses to PAC are not particularly reassuring.” She emphasises the importance of ensuring that future proposals for digitalising the tax system prioritise taxpayers’ needs and demonstrably improve upon existing arrangements.

The government acknowledges the inherent risks associated with a program of MTD’s scale and complexity and asserts that successful delivery hinges on external software developers building MTD products, engagement from the agent community to support customer readiness, and stability in HMRC’s resource and internal capacity to deliver MTD. However, Miskin highlights that the scale and complexity of MTD ITSA have consistently been underestimated, casting doubts on the realism of the delivery plan despite its increased detail.

HMRC has also released an updated Tax Information and Impact Note (TIIN), revising the estimate of transitional costs from £330 to £320 per business and projecting ongoing costs at £110 per year, per business, compared to the previous estimate of £35. Additionally, the exchequer impact (additional revenue) included in public finances is forecasted as follows: 2025/26 £25m; 2026/27 £120m; 2027/28 £465m; and 2028/29 £780m.

Furthermore, HMRC has published several research reports: