Financial Secretary to the Treasury (): The Government has set out an ambition to become one
of the most digitally advanced tax authorities in the world.
Making Tax Digital (MTD) is the first phase of our move towards a
modern, digital tax service fit for the 21st century. It supports
businesses through their digitalisation journey and provides a
digital service that many have come to expect in their everyday
lives. MTD helps businesses reduce common errors in their tax
affairs and allows for better customer interaction and guidance
through digital prompts and nudges.
Since the introduction of MTD for VAT in 2019, over 1.5m
businesses have joined and many are already experiencing
benefits. MTD users are reporting that preparing and submitting
returns is easier, and that MTD has increased their confidence in
managing tax affairs and using technology. MTD also puts
businesses on a path to further digitalisation: integrating tax
management with a range of business processes can contribute to
productivity gains.
During the pandemic, UK businesses increasingly turned to digital
tools to communicate remotely and work collaboratively.
Businesses adapted rapidly to the challenges posed by the
pandemic, using digital solutions to maintain resilience and
reduce disruption.
Over the past year, HMRC have 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.
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 have 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.
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.
