HMRC” in MTD ITSA transition

HMRC” in MTD ITSA transition

HMRC News Posted on 6 July 2022

HMRC must ensure the communication of key information on the rollout of MTD for ITSA is of a higher standard to ensure a smooth transition for accountants and their clients, according to Samantha Mitcham, the practice owner at SJCM Accountancy.

“The main thing here is that, if we don’t have the supporting documents we need from HMRC, we’re not going to have the ability to convince clients of the advantages when they push back against it,” said Mitcham during a roundtable discussion at Accountex in May.

“Until we’ve got that back-up from HMRC, clients aren’t able to grasp what it means for them, and often it just looks like it’s something we’re doing wrong.”

A core pillar of HMRC’s mission to digitalise the UK tax system, MTD for ITSA will require sole traders and landlords to file returns using an MTD-compliant software or a bridging tool from April 2024. They must also submit an ‘End of Period Statement’ for each income source at the end of the fourth quarter.

The UK’s VAT regime has undergone a similar transition in recent years. The new filing rules have been in place for the nation’s largest businesses since April 2021; in April 2022, businesses with a taxable turnover below £85,000 came into scope.

But for Mitcham, HMRC’s handling of the MTD for VAT set a negative precedent. This must be improved upon for ITSA, she told attendees, specifically lamenting the process of setting up a HMRC agent services account and linking each client to it.

“We were all struggling, whether it was with getting it initially set up or the fact that we had to link clients one by one,” she said. “As accountants we were all helping each other, but many probably haven’t got that kind of peer-to-peer support, so they need that communication from HMRC.”

This poor communication and service level was acknowledged by Melanie Hume, MTD external customer readiness lead at HMRC, who also spoke during the roundtable.

“I think one of the biggest issues was the copying of the client list, which we acknowledged for VAT was our error,” she said.

“It [agent services account] is a bit of a mystery to those who are perhaps new to being an agent or an accountant, so it’s really important that we get the communications right to help you through the process of registering.”

HMRC’s next steps for MTD ITSA

Under the new ITSA rules, landlords and self-assessment taxpayers will effectively be required to file six items in a single tax year: an update every quarter, an end of period statement and a final declaration.

In response to probes regarding this major uptick in filing requirements, Hume went on to reassure attendees that HMRC plans to distribute a great deal more information on the matter soon.

Part of this she explained, is an information notice akin to the VAT notice 700/22 which was released in April.

“We do appreciate that there’s still lots of information that you need to know, and this will give you that granular level of detail, and that confidence that it [the ITSA rollout] is going ahead as planned,” Hume said.

Hume went on to outline a series of other HMRC initiatives due to take place in the build-up to the new regime’s rollout, including a structured communication plan. She noted HMRC was ““trying really hard to listen to the feedback” and act on it.

“One of the things we’re working on is a time-bound communication plan, which is something we’re always asked for,” she said.

One of the key strands of this, Hume explained, is different “packs” of information which are to be distributed to agents, software developers and clients. This has been a major initiative for HMRC in conjunction with the agent and software communities, she said.

Pilot scheme ‘too narrow’

Hume also offered some details on the HMRC pilot scheme for MTD ITSA, noting the information packs will contain further details, and that HMRC has been holding forums to attain first-hand feedback from the key communities.

“That really feeds into the design of what we’re doing,” she said. “It’s my team’s job to push that back into the programme and really encourage the design to be reflective of what customer’s need.”

HMRC intends to evolve the pilot scheme into a full public beta in 2023, Hume added.

But SJCM’s Mitcham was quick to express reservation, arguing that while she would “love to put a couple of clients on the pilot”, HMRC’s criteria is currently “far too strict” for this to be possible.

“It is unfortunate because I think the pilot is potentially the best way for us as accountants to test the theory. It would put my mind at rest, and then I could my clients’ minds at rest,” she said. For Hume, however, the frustration of narrow criteria is shared by HMRC. A cautious approach is simply imperative at this stage due to the sensitivity of tax-related matters, she explained.

“It is frustrating for us as well. I think we have to remember that we’re talking people’s taxes here. We have to make sure that what we’re doing is as right as it can be in a pilot stage so we’re not causing a headache for people’s clients.”

Source: Accountancy Age 

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