UK government must “think carefully” about MTD implementation

HMRC must consider adopting a phased approach to implementing its Making Tax Digital (MTD) initiative to alleviate the compliance burden it places on smaller accounting practices and their clients, according to Yogesh Dhanak, senior technical advisory manager, ACCA UK.

“This is an area where HMRC can look at how it can reduce costs to business and build trust, while not missing the big picture that, done right and not rushed, MTD is a great opportunity,” he says.

Dhanak argues that the forthcoming rollout of MTD for income tax self-assessment (ITSA), scheduled to come into effect in April 2024, may prove a “struggle” for practitioners.

Accounting technology provider Intuit QuickBooks recently surveyed more than 500 UK accounting firms, with one in 10 admitting that new compliance obstacles would drive them to sell their business and leave the profession.

Respondents complained about a lack of clarity surrounding the MTD rollout. Nearly six in 10 (59%) said they didn’t know when the changes are due to come into effect, while just 32% said they fully understood the new reporting requirements, and more than a quarter said they’ve previously worried about poor communication from HMRC.

In addition, just one in three (34%) said they are “very confident” about the process of moving to MTD ITSA.

“With all the economic headwinds impacting businesses and individuals – especially the cost-of-living crisis – we would ask HMRC and the government to think carefully about whether a phased implementation is more feasible given the current burdens on all business, including smaller practitioners,” says Dhanak.

“Practitioners helping clients’ businesses survive and flourish may also struggle with MTD implementation.”

Simon Brook, managing partner at Broadbents Accountants, said that confusion around the implementation of MTD in the accounting community is to be expected.

“After so many delays and complex changes to the requirements, it’s no wonder MTD ITSA has many accountants confused,” he said.

In September 2021, the UK government announced that MTD ITSA would be delayed until 2024. This was the second postponement, with the original rollout having been set for 2022.

Support from software firms

Brook said that the various delays and mounting complexities have led Broadbent to lean more heavily on software providers to help “make sense of how to tackle new legislation”.

QuickBooks’ study found that more than a third (34%) of accountants will seek additional support from software firms to help them capitalise on MTD ITSA.

In fact, 55% of those surveyed said that MTD ITSA has affected their software choices, and they either have or intend to change the software provider they work with.

“Increased support from both HMRC and software firms will be essential to help [firms] successfully assist clients to meet the requirements and grow their client base,” said Nick Williams, director at Intuit QuickBooks.

“Software providers should aim to offer always-on guidance and help from experts to make this boom in business a reality for accountants.”