As announced at Autumn Statement 2023, the government will make some much-needed design changes to the Making Tax Digital for Income Tax Self Assessment (MTD ITSA) system, including enabling taxpayers to be represented by more than one tax agent.
In what is being hailed as a victory for the campaign by ICB and other professional bodies to improve the design of MTD for ITSA, the government announced changes in the Autumn Statement and released the outcome of HMRC’s Digital Small Business Review.
These changes will:
- enable taxpayers using MTD to be represented by more than one tax agent
- exempt businesses and landlords with income below £30,000, and those without a National Insurance number
- simplify the requirements for all taxpayers providing quarterly updates, and for taxpayers with more complex affairs, such as landlords with jointly-owned property
- remove the requirement to provide an End of Period Statement (EOPS)
HMRC’s Digital Small Business Review outcome sets out how MTD for ITSA addresses the needs of small businesses and provides details of further work and next steps.
Join us for a webinar all about the Autumn Statement and the MTD announcements on Tuesday 28 November.
ICB particularly welcomes the ability for multiple agents to be able to administer the affairs of taxpayers using MTD for ITSA. We campaigned for this change, alongside tax experts such as Paul Aplin OBE who spoke at the Bookkeepers Summit. We believe this facility now supports the common situation where a bookkeeper might be the preferred agent to file quarterly updates for a business even if the business has another tax agent engaged to provide an end-of-year service.
Change to MTD ITSA Reporting
In the initial version of the MTD ITSA framework, the process for year-end reporting was divided into two distinct phases: first, an End of Period Statement (EOPS) that detailed the taxable profit or loss from each business or property venture, and then a 'Final Declaration' that compiled EOPS information with other income sources, deductions, and reliefs to establish the ultimate tax liability.
However, this separation of what is currently a unified year-end procedure was potentially perplexing for taxpayers, particularly those without professional representation. The practicalities of this merging of the EOPS ino the final declaration workflow remain unclear, particularly in instances where a taxpayer's software may not fully support the Final Declaration.
Additionally, the decision to transform quarterly updates into a cumulative format is a significant improvement. This change enables taxpayers to rectify any discrepancies in their following quarterly submission, eliminating the need to redo previous quarter filings. This modification has been a long-standing request from ICB and other professional bodies.
Changes for landlords with jointly-owned property
Another welcome change comes from the ability for landlords who joint-own property to be able to opt out of quarterly updates and maintain less complex documentation for the properties they co-own.