The Treasury this afternoon confirmed a further two-year delay to the Making Tax Digital for income tax (MTD ITSA) timetable.
The financial secretary to the Treasury Victoria Atkins released a ministerial statement setting out adjustments to the scope and timing of MTD ITSA. These are:
- A two-year delay until April 2026 for mandatory MTD ITSA filing;
- The minimum income reporting level increased to £50,000, with those earning less than £50,000 but more than £30,000 mandated to join the scheme in 2027;
- The situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses;
- Partnerships will not be brought into MTD for ITSA as previously planned in 2025; and
- Points-based penalty system to be extended to MTD ITSA filers when they join.
While Atkins said the government remains committed to introducing MTD for ITSA to partnerships the decision on when they might join the scheme will be taken at a later date, as will the rules applicable for those landlords and sole traders earning less than £30,000.
This is clearly excellent news as HMRC were completely unprepared to deal with the proposed introduction of MTD ITSA on 6 April 2024, as were the majority of taxpayers who would have been impacted by this legislation.
The length of the delay to the MTD ITSA programme is a surprise but there are suggestions that potential complications of a general election and the resulting civil service purdah once an election is announced would have meant that a one-year delay would have been insufficient to resolve the very significant issues and failings that HMRC are facing to get this project over the line.
There has been no announcement as yet on a delay to the basis period reform which was introduced to enable MTD ITSA reporting. Given that this will accelerate income tax liabilities for businesses affected by this legislation at a time when most businesses can least afford to pay extra tax liabilities, it is possible that a further delay may be introduced to this legislation as well. More information will follow if a delay is announced to this legislation.