Making Tax Digital Latest News – ICAEW Publishes Reaction
The ICAEW has published its take on the government’s Making Tax Digital Small Business Review and the tone is one of disappointment. Here at Jack Ross, we share the concerns of the ICAEW, particularly around the availability of free or affordable software for lower-income small businesses. We have published our own summary of the government’s Review over at our Making Tax Digital website, mtd.digital.
MTD Small Business Review 2023: A Missed Opportunity
“The government has missed the opportunity to seriously reconsider its MTD ITSA policy.”
This quote from the article sums up the ICAEW’s view on the MTD ITSA announcement: it is a misstep. Like us here at Jack Ross Chartered Accountants, the ICAEW is broadly supportive of the Making Tax Digital initiative. The current tax system is very complex, and it is important to modernise and reflect the digital world that we live in. However, this should be done at a sensible pace and with clear support in place from HMRC to mitigate any problems taxpayers might have in complying on time, especially with regards to the cost. In the view of the ICAEW, it is seriously doubtful that HMRC has the capacity to deal with these problems as and when they arise. There are also concerns about the timetable and the bureaucracy.
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Concerns Around Timetabling and Quarterly Updates
“We have significant concerns over MTD ITSA policy, particularly the requirement for quarterly updates. Even if we put those concerns aside, we still doubt that it can be delivered to the current timetable.”
These are words spoken by Caroline Miskin, Senior Technical Manager Digital Taxation at ICAEW.
Access to MTD Software and Penalty Reforms
Access to Making Tax Digital compliant software is made difficult by the continued uncertainty around the turnover threshold – making software developers hesitant to invest in making free software available. Since the government is wavering on as and when small businesses with annual turnover below £30,000 will be mandated to comply, it is unclear what the long-term benefits of such an investment would be for software developers. This locks taxpayers and developers into a vicious cycle; the software stays expensive, therefore the low-turnover businesses cannot afford to comply, therefore affordable software is not developed.
There is also uncertainty around penalty reform – announced in HMRC’s ‘Interest harmonisation and penalties for late payment and late submission’ policy paper from 17 November. The penalty reform will initially be rolled out for MTD compliant customers and eventually for all taxpayers – meaning there will be a transitional period where two separate penalty systems will co-exist. This is bound to cause confusion and numerous bureaucratic errors and delays – errors and delays that may, in turn, cost the taxpayer and their accountants.
How Jack Ross Can Help
At Jack Ross Chartered Accountants in Manchester, we recognise the implementation of Making Tax Digital for Income Tax Self Assessment is a major change in the way in which a lot of small businesses operate. We use MTD-compliant cloud accounting software Xero for all of our clients and can assist in any stage of the transition, from digitising your accounts to ensuring continued compliance with the new rules in the event of business growth/increased turnover.
If you are in need of our expert accounting services, use the contact form below and one of our Making Tax Digital specialists will be in touch to discuss next steps.