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In this week’s miscellaneous updates, HMRC has published a range of updated guidance for key legislative changes which took effect from 6 April 2025 and draft legislation on the carbon border adjustment mechanism has been published for consultation. HMRC has issued a press release highlighting that Making Tax Digital for income tax commences next year and in another press release to mark the 20th anniversary of HMRC, HMRC looks to the future and says it is “harnessing the spirit of then Chancellor Gordon Brown’s bold reforms and embarking on a new era of transformation”. An update has been published on the consultation on predevelopment costs and the latest schedule of HMRC Talking Points live and recorded webinars for tax agents are available for booking. Spaces are limited, so take a look now and save your place. And finally, check HMRC’s online services availability page for details of planned downtime and the online services affected.   Updated guidance published on key legislative changes   Globally mobile employees The new Foreign Income and Gains regime commenced from 6 April 2025. HMRC has therefore published a collection of new guidance on 'Globally mobile employees' for employers. This includes guidance on the impact of residence on an employee’s liability to UK income tax, the newly reformed overseas workday relief, and the operation of PAYE for the new rules in place from 6 April 2025.   HMRC has also published guidance on how to send a notification to HMRC on running PAYE on a proportion of globally mobile employee’s income related to their UK duties. This addresses the new Section 690 Income Tax (Earnings and Pensions) Act 2003 direction process.   HMRC has also updated the relevant sections of their manuals with more detailed guidance as follows: new pages in the PAYE manual to cover the new globally mobile employee PAYE notification process,   a new section in the Employment Income manual for Overseas Workday Relief, and   updated pages on travelling expenses for non-resident and qualifying new resident employees working in the UK.  In September 2024, the Institute established a new working sub-group of the NI Tax Committee and Tax Committee South which is examining the complexity of cross-border and remote/hybrid working on the island of Ireland with a view to discussing the complexities of this with both the UK and Irish Government to identify improvements for employers and employees impacted. New Inheritance Tax (IHT) residence based regime  From 6 April 2025, the UK’s IHT territoriality rules changed from a domicile to residence-based regime. Broadly, and subject to transitional provisions, individuals who have been UK tax resident for at least 10 out of the previous 20 tax years are now considered ‘long-term UK resident’ and are therefore subject to IHT on their worldwide assets. There are specific provisions relating to trusts.   HMRC has now published guidance, and changes to its IHT manual which includes a new section on the rules for long-term UK residents.  Abolition of non-domiciled regime  The non-UK domiciled ‘remittance’ regime was abolished from 6 April 2025 and the new Foreign Income and Gains (FIG) regime was introduced. As a result, UK tax resident individuals now pay tax on worldwide income and gains on an arising basis irrespective of their domicile. This is subject to the four-year FIG regime which is available to individuals within their first four years of UK tax residence, after a period of at least 10 consecutive years of non-residence. These changes are also accompanied by a series of transitional rules which include the three-year Temporary Repatriation Facility for those previously taxed on the remittance basis.   HMRC has now published guidance to support these changes as follows:  a new Residence and FIG regime manual, and   updated pages in the Trusts, Settlements and Estates Manual, and   International Manual.   Further HMRC guidance and manual updates are expected to be published in due course.  Update on consultation on predevelopment costs  In the 2024 Autumn Budget, the Government committed to launching a consultation in early 2025 to explore the tax treatment of predevelopment costs. Earlier this month, HM Treasury published an update on this which referred to the recent Court of Appeal judgment in Orsted West of Duddon Sands (UK) Ltd v HMRC .   According to HM Treasury, as this case considered “matters with significant readout across to this issue” the publication of this consultation has therefore been postponed. The Government will determine its next steps in respect to this consultation in due course.   In the meantime, views from stakeholders on this judgment and its implications are invited by email to predevcosts@hmtreasury.gov.uk. 

It’s now less than a year to the first tranche of mandation of MTD for income tax for unincorporated sole trade businesses and landlords with turnover exceeding £50,000. The Institute is inviting those members affected by this change to take a short five question survey which we are using as a temperature check to assess readiness and further discuss the challenges this presents with HMRC. The survey will remain open for the next two weeks and will take less than 5 minutes to complete. A more detailed survey on MTD will be launched before the summer. Take the survey now.  The Northern Ireland Tax Committee met recently with HMRC’s MTD Programme Director who also was in attendance at the February 2025 Practice News webinar. HMRC gave an update on the current status of the MTD project whilst also reflecting on its challenges. HMRC’s ambitions for the next phase of testing in 2025/26 were also discussed. HMRC has recently been writing to agents who are likely to have clients in the first phase of mandation; this is now being followed by letters to taxpayers.   HMRC is also keen to hear about the plans of our member firms to get ready for this major change and specifically why firms are not planning to take part in testing in 2025/26. In particular HMRC would welcome views on what challenges/blockers are getting in the way of participation. Email tax@charteredacocuntants.ie to share your views.  Despite our reservations about MTD, the Institute will continue to work with HMRC on MTD readiness and is developing a cross-department MTD strategy to assist members in their preparations. We will also continue to represent members views as we approach April 2026.  HMRC has also published new guidance for agents about client authorisations and signing clients up for making tax digital for income tax. The step by step guides for agents and individuals and guidance for sole traders and landlords have also been updated. These publications are available as follows:  Add your client authorisations for Making Tax Digital for Income Tax, Sign up your client for Making Tax Digital for Income Tax, Making Tax Digital for Income Tax as an agent: step by step, Making Tax Digital for Income Tax for individuals: step by step, and Sign up for Making Tax Digital for Income Tax. From 7 April 2025 until next April, HMRC will also be contacting users who have signed up to participate in the MTD trial about how the testing of the service is progressing. 

It’s now less than a year to the first tranche of mandation of MTD for income tax for unincorporated sole trade businesses and landlords with turnover exceeding £50,000. The Institute is inviting those members affected by this change to take a short five question survey which we are using as a temperature check to assess readiness and further discuss the challenges this presents with HMRC. The survey will remain open for the next two weeks and will take less than 5 minutes to complete. A more detailed survey on MTD will be launched before the summer. Take the survey now.  The Northern Ireland Tax Committee met recently with HMRC’s MTD Programme Director who also was in attendance at the February 2025 Practice News webinar. HMRC gave an update on the current status of the MTD project whilst also reflecting on its challenges. HMRC’s ambitions for the next phase of testing in 2025/26 were also discussed. HMRC has recently been writing to agents who are likely to have clients in the first phase of mandation; this is now being followed by letters to taxpayers.   HMRC is also keen to hear about the plans of our member firms to get ready for this major change and specifically why firms are not planning to take part in testing in 2025/26. In particular HMRC would welcome views on what challenges/blockers are getting in the way of participation. Email tax@charteredacocuntants.ie to share your views.  Despite our reservations about MTD, the Institute will continue to work with HMRC on MTD readiness and is developing a cross-department MTD strategy to assist members in their preparations. We will also continue to represent members views as we approach April 2026.  HMRC has also published new guidance for agents about client authorisations and signing clients up for making tax digital for income tax. The step by step guides for agents and individuals and guidance for sole traders and landlords have also been updated. These publications are available as follows:  Add your client authorisations for Making Tax Digital for Income Tax, Sign up your client for Making Tax Digital for Income Tax, Making Tax Digital for Income Tax as an agent: step by step, Making Tax Digital for Income Tax for individuals: step by step, and Sign up for Making Tax Digital for Income Tax. From 7 April 2025 until next April, HMRC will also be contacting users who have signed up to participate in the MTD trial about how the testing of the service is progressing.   

Building on the package of tax gap measures which were announced at the Autumn Budget, a further series of announcements were made which included the extension of Making Tax Digital for income tax to even smaller businesses which we report on in more detail in a separate news item. Debt management and compliance investment  According to the government, at the end of 2024, the stock of tax debt (unpaid tax liabilities owed to HMRC) was over £44 billion, more than double the level five years ago. In order to reduce this, the government is further investing in HMRC’s debt management capacity which will include ‘an innovative test and learn pilot to collect more aged debts whilst also moving towards more automated debt recovery.  The government is also investing £87 million over the next five years in HMRC’s existing partnerships with private sector debt collection agencies to collect more unpaid tax debts. An additional £114 million will be invested over the next five years to recruit an additional 600 HMRC debt management staff; 500 more HMRC compliance staff will also be recruited via a £100 million investment.  Late payment penalties  Late payment penalties for VAT and income tax self-assessment taxpayers (as they join MTD) will increase from April 2025 onwards. The new rates will be 3 percent of the tax outstanding where tax is overdue by 15 days, plus an additional 3 percent where the tax is overdue by 30 days, plus an additional 10 percent per annum when overdue by 31 days or more. Consultations  The government also published four new consultations to support HMRC’s efforts in closing the tax gap: How HMRC can make better use of third party data to increase automation and close the tax gap – closes 21 May 2025 Proposals to strengthen HMRC’s ability to take action against those tax advisers who facilitate noncompliance from their clients – closes 7 May 2025 Closing in on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills – closes 18 June 2025, and Options to simplify and strengthen HMRC’s inaccuracy and failure to notify penalties – closes 18 June 2025. Counter-fraud capability and investigations  Additional criminal investigations will focus on delivering a strong deterrent. This will include tackling those who undermine legitimate trade and small business, fraud committed by the wealthy, fraud facilitated by those in large corporations, and by individuals and companies who make it possible for others to hide money offshore. Investigations will also address organised criminal attacks, focusing on illicit finance and complex money laundering schemes.   As part of the overall investment in HMRC resourcing, HMRC is overhauling its approach to offshore tax noncompliance by the wealthy, recruiting experts in private sector wealth management and deploying AI and advanced analytics to help identify and challenge those who try to hide their wealth, wherever they try to hide it.   During the next five years, the government will increase HMRC’s resources assigned to tackling wealthy offshore noncompliance by around 400 people, who are estimated to bring in over £500 million over the forecast period.   New informant reward scheme  A new HMRC reward scheme for informants will be launched later this year, with the aim of targeting serious noncompliance in large corporates, wealthy individuals, offshore and avoidance schemes. The new scheme will take inspiration from the successful US and Canadian models, rewarding informants with compensation linked to a percentage of any tax taken as a result of their actions.  Phoenixism  To tackle ‘phoenixism’, HMRC, Companies House, and the Insolvency Service will deliver a joint plan to tackle those using contrived insolvencies to evade tax and write off debts owed to others. This includes increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions to double the amount of tax protected to £250 million by 2026/27.   Change at HMRC  The government will also accelerate change at HMRC, including through introducing voice biometrics, using AI in taxpayer services and compliance, and running a customs digitalisation pilot sharing trusted trader credentials with US Customs and Border Protection.   Tax simplification  Further measures will be announced later in the spring to simplify the tax and customs systems, and in the summer, HMRC will publish a transformation roadmap. These measures will aim to collectively reduce administrative burdens so businesses and individual taxpayers spend less time on tax and customs administration.   Direct recovery of tax debts   HMRC will re-start ‘direct recovery’ of tax debts owed by individuals and companies who have the ability to pay but choose not to do so. The government will also explore options to automate the process for collecting lower value tax debts.   

Making Tax Digital (MTD) for income tax is being extended to sole trades and landlords with qualifying income of more than £20,000 from April 2028. The Government also announced further changes to MTD as set out in the technical note “Modernising the tax system through Making Tax Digital”, details of which are provided below. The Institute has been engaging extensively with HMRC, together with the other professional bodies, to raise the impact of this major change to income tax reporting on individuals and their agents and the challenges that this will present.  There is now just over a year to the first tranche of mandation of MTD for income tax which will commence from April 2026 for those with gross income of over £50,000 and from April 2027 for those with gross income over £30,000. Even more worryingly, the government has also said that it will continue to explore ‘how it can best bring the benefits of digitalisation to more of the around four million taxpayers who have income below the £20,000 threshold’.  We will be discussing the MTD for income tax Spring Statement measures and announcements with HMRC via various stakeholder forum meetings in the coming weeks and months. Despite our reservations about MTD, the Institute will continue to work with HMRC on MTD readiness and is developing a cross-department MTD strategy to assist members in their preparations. We will also continue to represent members views as we approach April 2026 and will be conducting a short survey on MTD for income tax in next week’s Tax News.  End-of-year tax reporting for MTD   Some users of MTD for income tax will have other sources of income that need to be reported in Self-Assessment (SA). These additional income sources must be reported at the end of the tax year, alongside any necessary adjustments to their business income and expenses.   Previously, users would have been able to use HMRC’s online filing service to submit their final tax return. HMRC has now announced that its online filing service will not be available to do so and that MTD taxpayers must file their tax return through their MTD software. The government will adopt this change and introduce legislation ahead of April 2026.   One or more MTD-compatible software products will therefore be needed to meet SA filing obligations which makes the choice of software used by the agent/taxpayer of extreme importance.   Exempting/deferring certain groups from MTD  The government believes that some taxpayer groups will face disproportionate barriers to operating MTD and should be exempt. The following groups will therefore not be required to use MTD for income tax, (subject to notifying and satisfying HMRC that they are exempt):   taxpayers who have a power of attorney, ·non-UK tax resident foreign entertainers/sportspeople who have no other income sources that count as qualifying income for MTD, and taxpayers for whom HMRC cannot provide a digital service. The following groups will also not be required to join MTD for income tax over the course of this Parliament:   ministers of religion, Lloyd’s Underwriters, recipients of the married couples’ allowance, and recipients of the blind persons’ allowance. Additionally, individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 schedule. HMRC will work with stakeholders to finalise the design of a one-year deferral for these groups to allow time to incorporate into MTD the government’s changes to the taxation of non-UK domiciled individuals.   Legislation will therefore be introduced to defer/exempt these groups and the criteria for deferrals/exemptions will be set out in guidance once the legislation is finalised.   Finalising the policy framework for MTD and penalty reform  The government has announced several further changes to the design of MTD and penalty reform. These include:  changes to enable taxpayers with an accounting date of 31 March to start their MTD obligations on 1 April in the first year of operating MTD which will avoid the need for burdensome manual adjustments at the end of the tax year, and a power for HMRC to cancel/reset late submission penalty points and to cancel associated financial penalties; this enables HMRC to cancel penalty points, for instance, in periods prior to insolvency, so that penalty reform reflects HMRC’s general approach to insolvent taxpayers. HMRC will continue to engage stakeholders on these changes before legislation is introduced ahead of April 2026. 

HMRC has commenced sending letters on Making Tax Digital (MTD) for income tax to agents it believes will have clients mandated to meet the requirements of MTD when it commences from April 2026 for unincorporated sole trade businesses and landlords with turnover exceeding £50,000. The letters will be followed by targeted letters to the same agent’s potentially mandated clients. This is part of a wider comms plan to raise awareness of MTD. The agent letters are available here and the client letters are available here. HMRC is also starting to host webinars on MTD for income tax. The webinar on 25 March 2025 is already full but there is availability for the next webinar on 3 April 2025. These are the first in a series of three webinars aimed at agents. The webinar on 3 April will focus on how to get ready and sign up for MTD income tax. HMRC has also added an additional software provider, IRIS accountancy suite, to the list of software products currently available for taxpayers who have volunteered to test MTD for income tax. This brings the total number of software products to 18.  

The Northern Ireland Tax Committee chaired by Janette Burns met recently for the first time in 2025. A range of issues was on the agenda including Making Tax Digital (MTD) for income tax which commences in just over a year from April 2026 for unincorporated businesses and landlords with turnover from self-employment and property income exceeding £50,000 in 2024/25. The meeting was attended by several HMRC MTD Programme representatives, including the Programme Director Craig Ogilvie, who gave an update on the current status of this project whilst also reflecting on its challenges. Craig also set out what HMRC’s ambitions are for the next phase of testing in 2025/26, including the supports which will be available to taxpayers and agents. HMRC will be writing to agents who are likely to have clients in the first phase of mandation in the coming months; just one element of a wider comms plan. HMRC is keen to hear about the plans of our member firms to get ready for this major change and, in particular, specifically the reasons why firms are not planning to take part in testing in 2025/26 and what the challenges/blockers are preventing participation. Email tax@charteredaccountants.ie to provide your feedback. The Institute continues to work with HMRC on MTD readiness and is developing a cross-department MTD readiness strategy to assist members in their preparations. Last week HMRC held an MTD event in Belfast on Tuesday 4 March which the Institute was represented at. Another event is to be held in Belfast later in 2025 which we will share details of once available. HMRC’s MTD team, including the Programme Director also presented at the Institute’s Practice Consulting team’s Practice News webinar at the start of February. On the guidance front, HMRC has published an updated version of work out your qualifying income for Making Tax Digital for Income Tax. The changes made to this guidance are as follows: Clarified the definition of ‘qualifying income’. This is because HMRC is seeing that various taxpayer types think that other income sources are included under ‘income from self-employment’ e.g. income from a partnership or dividends from their personals service company when they are not, Explanation of ‘latency’, Added a new sub-section on what’s not included, Added new sections on if you use the cash basis and are VAT registered, if the transactions in UK land rules apply, and if you are impacted by basis period reform, and Redesigned the section on residency and removed the concept of domicile which will no longer be relevant from April 2025. These changes align to internal HMRC feedback and policy review but are also based on user feedback from ongoing user research in support of this interactive guidance tool, linked from Find out if and when you can use MTD. The list of available MTD for income tax software has also been updated.

HMRC’s Making Tax Digital (MTD) team will be in Northern Ireland next week on Tuesday 4 and Wednesday 5 March and would like to visit/meet with some agents to talk about MTD for income tax. With just over one year to the first tranche of mandation from April 2026, we would encourage small and medium sized firms in particular to consider taking up this unique opportunity for a face to face meeting. If your firm would like to meet with HMRC, please contact us by email to take forward. HMRC has also recently updated the list of available software for MTD for income tax with sixteen products now available to choose from.

The first Practice News webinar of 2025, brought to you by Practice Consulting, took place on Friday 7 February 2025. In attendance were senior representatives from HMRC’s Making Tax Digital (MTD) team, including the MTD Programme Director Craig Ogilvie and Gemma Hope, from the Agent External Readiness team. Attendees heard how agents and taxpayers can prepare for MTD for income tax, including the benefits of joining its testing programme and key readiness tips. A recording of the webinar is available for viewing here. HMRC’s slides are also available on our website. The webinar also contained the usual regular features including updates on both Irish and UK tax, in addition to the latest compliance and technical news from the February 2025 edition of Practice Matters.

HMRC has recently updated the Making Tax Digital (MTD) for income tax taxpayer and agent sign up guidance pages to reflect changes to the eligibility criteria for participating in the MTD for income tax trial in 2025/26. Following these changes, taxpayers reporting the high income child benefit charge and/or income from a jointly owned property will be able to sign up voluntarily to join the MTD for Income Tax 2025/26 trial phase ahead of mandation for the first phase of taxpayers with turnover exceeding £50,000 from April 2026. Further updates on the 2025/26 testing phase are expected ahead of its launch which is currently targeted for April 2025.

HMRC is hosting a Making Tax Digital (MTD) for income tax event at their Croydon Regional Centre office later this week on Thursday 5 December 2024. Read on for more details. Note that events are being planned across the UK with one to be held in Belfast in Spring 2025. Event details: Location: HMRC, 1 Ruskin Square, Croydon, CR0 2WF.  Time: 11am start – 3pm finish.  The event is for agents and software developers who have clients who will need to use MTD for Income Tax, to help you get ready for when it becomes a legal requirement from April 2026. At the event you will: Find out more about the testing phase, including the extra support on offer, Have access to hands-on support to sign up to testing, and Be able to ask HMRC your MTD questions. This event has limited spaces so if you are interested and want to attend please email mailboxmakingtaxdigital@hmrc.gov.uk to secure a space. By emailing HMRC, you are agreeing to be contacted by HMRC before, during and after this event.   

Last month we updated readers on developments in this space ahead of HMRC’s plan to widen the beta trial in 2024/25, commencing from 22 April. As set out in that update, HMRC has now expanded the beta trial and recently sent an email to agents providing information on how to sign qualifying clients up to the Making Tax Digital (“MTD”) for income tax trial. Further updates are set out below.   Suspension of meetings  The Institute is currently considering how best to support members in their preparations for this change and we will continue to attend HMRC forums on MTD. However, it should be noted that due to the pre-election period (known as purdah), HMRC has now suspended some forum meetings, including meetings on MTD.  Technical consultation on new regulations  HMRC has launched a technical consultation on proposed new regulations (“The Penalties for Failure to Pay Tax (Assessments) Regulations 2024”), which is running until 10 June 2024.   These draft regulations relate to the reformed penalty system for late payment of tax, which is set out in Schedule 26 to the Finance Act 2021. Penalty reform began for VAT taxpayers from 1 January 2023, and from April 2024 for Income Tax Self-Assessment (“SA”) for those participating in the MTD for income tax beta trial. For all other Income Tax SA taxpayers, penalty reform will commence from April 2026 as MTD for income tax begins to be mandated  Current legislation allows HMRC to assess a second late payment penalty within a two-year assessment time limit, at the point the outstanding tax is paid in full. However, HMRC is not able to assess this penalty if the tax remains unpaid. The proposed legislative change will allow the second payment penalty to be assessed towards the end of the time limit, in circumstances where the outstanding tax has not yet been paid in full. This will mean taxpayers will not be able to intentionally avoid a second late payment penalty by not paying their outstanding tax before the end of the two-year time limit.   New MTD manual   A new manual on how to use MTD for income tax has now been published. Since our last update, the number of available software packages, which already includes some of the big players, has been expanded from five to seven, with a range of other software packages in development. 

With the news that HMRC is aiming to expand the trial for Making Tax Digital for income tax Self-Assessment (“MTD for income”) from next Monday 22 April, we take a look at recent developments in this area. The Institute still has many reservations about this project and will continue to represent members views on MTD for income tax when in attendance at HMRC forum meetings in this space. Feedback can be sent at any time to tax@charteredaccountants.ie.  Amended MTD regulations  As previously announced, MTD for income tax will commence for unincorporated businesses and landlords with business and/or property income over £50,000 from April 2026. Those with income over £30,000 are mandated from April 2027. In December 2023, HMRC consulted on the amended draft MTD for income tax regulations which Chartered Accountants Ireland responded to.  Following this consultation, The Income Tax (Digital Requirements) (Amendment) Regulations 2024 have now been laid. These, alongside the earlier regulations which they amended, set out the requirements which must be complied with, including the use of MTD-compatible software to keep and preserve business records digitally and the sending of quarterly updates of these records to HMRC. Note that the deadline for submitting quarterly MTD for income tax returns will now be the 7th day of the month after the relevant tax year quarter end, amended as recommended in the Institute’s consultation response in order to align with the VAT return filing deadline for those within VAT Stagger 1.   An Update Notice has also been published which sets out the information which will need to be sent to HMRC quarterly using MTD-compatible software. The update information that must be provided in a quarterly update period is dependent on the relevant person’s business or businesses. HMRC will also publish the Software Notice and Notice for joint property owners in the Spring, alongside detailed guidance for each. More information is also still to be published on the digital record keeping and digital links requirements.   MTD trial  HMRC’s aim in 2024/25 is to expand the current MTD for income tax trial by encouraging agents to consider which clients can sign up and then to sign them up to participate in the expanded private beta testing trial in 2024/25. This month, HMRC will be sending further communications regarding the MTD for income tax trial to its entire agent mailing list. Overall, this involves a three-armed email campaign which will provide several opportunities for agents to learn more about the testing and how to sign up.   HMRC began sending these comms last month. The next email will then be sent at launch, which will signpost agents towards the updated GOV.UK pages on compatible software, eligibility criteria, and sign-up pages.   However, as of 10 April 2024, there still remains a very limited number of software packages that are available to participate in the trial with just five vendors confirmed, although many are in development, some of which may become available during 2024/25 or later. The Institute recommends that agents carefully consider the advantages and disadvantages of signing up clients to participate in the trial.  HMRC has also now published detailed guidance in respect of the penalty regime which will apply when trial participants testing MTD for income tax make late submissions. These changes to penalties only apply during the testing phase and must be agreed to before a taxpayer can be signed up to participate in the trial.  Broadly, agents who wish to develop a list of clients that are eligible to join the expanded trial in 2024/25 should follow the below steps when considering their options:  Step 1 - assess client suitability – this can be done by using an eligibility checker to triage/filter which clients are eligible to participate.  Step 2 - discuss this with the client and get their agreement before going back into the service to actually sign them up.  Note that full client approval is needed to then progress onwards and sign the client up to participate.  The cost of MTD  HMRC has also sent the following message about the cost of MTD:  “We have also published an updated Tax Information and Impact Note (TIIN), to accompany the Regulations. Among other impacts, this sets out the latest projected exchequer benefits, operational costs, and customer cost impacts of MTD ITSA. Since we published the last TIIN in September 2021, we have updated the assumptions within the customer costs model. We have also reviewed the methodology and cost assumptions with tax professional bodies and the Administrative Burdens Advisory Board (ABAB).   We recognise that there are transitional costs for business in moving to MTD. Both these, and the continuing costs will vary depending on factors such as size, complexity, and digital capability of the business.   Continuing costs     Once implemented, MTD expansion is estimated to increase the total net continuing costs of complying with the tax system for all mandated businesses by £196m per year - about £110 per year, per business. This compares to a previous net cost estimate in 2021 of £152m per year, or about £35 per year, per business. A range of assumptions have been updated since the last estimates, including uplifting costs and wage rates in line with inflation, re-examining time spent undertaking tasks, reviewing the price of software products, and using the latest evidence on record keeping practices.   Transitional costs     The decision to increase the previous £10,000 income threshold to £30,000 means there is a smaller, more digitally able population within scope. We have therefore reduced our per-business estimate for the transitional costs, in comparison to the estimates published in our last TIIN.   We estimate the transitional costs for all mandated businesses will total £561m, which equates to about £320 per business. This compares to £1,383m (about £330 per business) in our 2021 figures. Although the reduction in population size means transitional and continuing costs are lower overall than previously estimated, we recognise that the continuing customer costs per business are significantly higher. We are confident that these updated estimates in the TIIN present a more granular and informed position. These remain estimates, not a definitive statement of costs, but we have used the most robust methodology possible to estimate and set them out in a realistic and straightforward way. ABAB have also advised that they are comfortable with the revised assumptions.   We also know that, whilst there are costs in using MTD, we expect there to be benefits in the future. For example, using compatible software will reduce opportunities for error and help businesses and landlords get their tax affairs right first time. Evidence from MTD VAT also points to the use of compatible software encouraging businesses to digitalise other elements of their business due to productivity benefits. We are committed to extending these benefits to business, self-employed individuals and landlords who are registered for Self Assessment from April 2026. The government will continue to keep the decision on whether to mandate businesses and landlords with income below £30,000 to use MTD ITSA under review, although this group can still sign up voluntarily.”  Turnover less than £30,000 population  As announced at the 2023 Autumn Statement, for now, HMRC is not extending MTD for income tax to unincorporated business and landlords with turnover less than £30,000. In February 2024 HMRC published externally commissioned qualitative research conducted with small businesses with turnover between £10,000 and £30,000 per year. Key findings from the research are set out in detail at section 1.3 of the report.  Government response to November 2023 Public Accounts Committee ("PAC") report  In February, the Government published its response to the recommendations in the PAC’s report of November 2023 on Progress with Making Tax Digital.   The PAC’s findings were based on a report by the National Audit Office (NAO) in 2023, in addition to oral evidence provided in June 2023 by members of HMRC’s Executive Committee.   Both the NAO and PAC’s work on MTD provides important scrutiny and perspective on the programme, hence the Government’s response sets out how it is addressing each of the PAC’s recommendations.   According to HMRC, the response underlines the focus on having a clear and widely understood roadmap for delivery, further explains the position on a range of wider issues, including the assessment of HMRC’s view of its benefits, and provides details of its approach to working with the software industry.   Several of the PAC's recommendations are underpinned by evidence of work that has already been implemented or which is underway with the overall aim of accelerating towards expanding the testing programme in 2024/25, so that HMRC can fully test its IT functionality well ahead of April 2026. 

In response to the consultation on the draft updated MTD for Income Tax legislation, the Institute took the opportunity to highlight its ongoing concerns in relation to this project, including the need to uplift the exemption limit. In addition, the lack of available software and small numbers currently participating in the trial are worrying. The Institute’s Northern Ireland Tax Committee was responding to the consultation opened last month into the draft legislation which has been updated to reflect the changes announced in December 2022 and as part of the Small Business Review in November 2023.  Key recommendations also featured in the Institute’s response include the following:- HMRC should seek to develop the detailed guidance on MTD for Income Tax after a period of consultation with stakeholders - this should contain practical worked examples/case studies of different scenarios and should carefully distinguish between the digital recording keeping requirements and functional compatible software requirements;  This guidance should be published in a timely manner in advance of the commencement date;  HMRC should work at pace and aim to publish the final MTD for Income Tax legislation, associated notices, and more detailed guidance as a matter of urgency;   The tax year from which new sources of trading or property income falling within MTD for Income Tax should be reported should be amended to the next tax year after acquiring that new source of income;   The quarterly filing deadline should be set as the seventh day of the next month to align with the VAT return filing deadline;   Unincorporated businesses should be able to move out of MTD for Income Tax in the next tax year where, turnover has fallen below the exemption limit and by a significant percentage; and   HMRC should undertake a detailed matching exercise to remove any anomalies so that quarterly update information matches that reported on the relevant self-assessment returns for trading and property income. 

As a result of the changes to Making Tax Digital (“MTD”) for income tax, details of which were published at the 2023 Autumn Statement, HMRC has published draft regulations (and associated notices) for consultation. The consultation is open until 12 January 2024. By way of reminder, MTD for income tax will be mandated from 6 April 2026 for unincorporated businesses and landlords with turnover over £50,000, whilst those with turnover over £30,000 are mandated from 6 April 2027. The turnover between £10,000 and £30,000 population are not currently mandated, however HMRC has advised that the position in relation to these smaller businesses and landlords is still under review.  The draft regulations amend the Income Tax (Digital Requirements) Regulations 2021 which provide the statutory legislative framework for MTD for income tax.   Amendments included in the draft regulations and notices reflect recent government decisions included within the outcome of the MTD small business review. They also reflect the government announcement in December 2022 on the introduction of the phased mandation schedule for MTD for income tax.  The following specific changes are reflected in the draft regulations:-  the revised MTD mandation dates and thresholds announced in December 2022;  changes which aim to improve the design of quarterly updates;  the removal of end of period statements;  easements for landlords with jointly owned property; and  exemptions for specific groups.  This a technical consultation, focused on ensuring that the draft regulations and notices achieve their intended policy purpose. Please contact makingtaxdigitalconsultations@hmrc.gov.uk if you have any questions on the draft regulations and notices. Responses to the consultation should also be submitted to the same e-mail address.  Last week HMRC also published a media article on MTD for income tax which aims to raise awareness across a broad audience. The article is a part of the Guardian newspaper’s ‘Business Transformation’ pull-out. In addition, a new video was also launched featuring MTD’s new Programme Director, Craig Ogilvie.  

Although not featured in the Chancellor’s speech, buried in the Autumn Statement 2023 publications is the outcome of HMRC’s recent small business review. This comprises what is referred to as a “package of changes to simplify the design of Making Tax Digital” (“MTD”). A separate corporate report with more detail was also published which provides details of further work and next steps. More information is also available in an email from HMRC. The package of changes announced includes maintaining the current MTD turnover threshold at £30,000 and design changes which aim “to simplify and improve the system”. These changes will take effect from April 2026 when MTD for income is initially scheduled to commence for self-employed business and landlords with turnover of more than £50,000. Earlier this year, Chartered Accountants Ireland met with HMRC to discuss the review and highlighted several concerns, including the need for HMRC to increase the exemption threshold. We are pleased to see that HMRC has decided, at present, to maintain the turnover limit at which MTD will be mandated to £30,000, effectively increasing this from the original exemption limit of £10,000. Taxpayers with turnover from £30,000 to £50,000 are still mandated to join MTD from April 2027. However, the Government will keep under review the turnover less than £30,000 population.  The MTD changes announced last week specifically:- aim to simplify the requirements for all taxpayers providing quarterly updates, and for taxpayers with more complex affairs, such as landlords with jointly owned property; remove the requirement to provide an End of Period Statement;  exempt some taxpayers, including those without a National Insurance number, from MTD; and  enable taxpayers using MTD to be represented by more than one tax agent. 

Although not featured in the Chancellor’s speech, buried in the Autumn Statement 2023 publications is the outcome of HMRC’s recent small business review. This comprises what is referred to as a “package of changes to simplify the design of Making Tax Digital”. A separate corporate report with more detail was also published which provides details of further work and next steps. The package of changes announced includes maintaining the current MTD turnover threshold at £30,000 and design changes which aim “to simplify and improve the system”. These changes will take effect from April 2026 when MTD for income is initially scheduled to commence for self-employed business and landlords with turnover of more than £50,000. Earlier this year, Chartered Accountants Ireland met with HMRC to discuss the review and highlighted several concerns, including the need for HMRC to increase the exemption threshold. We are pleased to see that HMRC has decided, at present, to maintain the turnover limit at which MTD will be mandated to £30,000, effectively increasing this from the original exemption limit of £10,000. Taxpayers with turnover from £30,000 to £50,000 are still mandated to join MTD from April 2027. However, the government will keep under review the turnover less than £30,000 population. These changes specifically:- simplify the requirements for all taxpayers providing quarterly updates, and for taxpayers with more complex affairs, such as landlords with jointly owned property; remove the requirement to provide an End of Period Statement; exempt some taxpayers, including those without a National Insurance number, from MTD; and enable taxpayers using MTD to be represented by more than one tax agent.      

Last week the Institute attended HMRC’s Making Tax Digital (“MTD”) for Income Tax Self-Assessment (“ITSA”) quarterly forum meeting. The meeting provided an update on what’s been happening with the Small Business Review and also discussed the current MTD for ITSA trial. Small Business Review  HMRC advised that the outcome of this review into landlords and self-employed individuals with turnover less than £30,000 is expected to be announced sometime in the autumn but could not provide further details of when exactly this may be, except to say that any announcement would be to “Ministerial timelines”.   The review is designed to understand this taxpayer population better taking into account the burdens that MTD for ITSA would impose, and pain points, including the potential for easements and simplifications. HMRC also continues to consider the implications of MTD for ITSA on niche incomes such as foster carers. Revised regulations are expected to be published in early 2024 following a technical consultation on these in draft.  Earlier this year, Chartered Accountants Ireland, and several members from a range of practice sizes met with HMRC as part of the Small Business Review. During the meeting we stressed that the MTD for ITSA exemption threshold needs to be more realistic and should be set at the VAT registration threshold. We also expressed concern that agents will not be able to bulk sign up clients, that the trial will only be public from April 2025, and that there is a need for free bridging software to be available.   MTD for ITSA trial  Following the December 2022 announcement of the delay to the introduction of MTD for ITSA and its phasing in from 2026, HMRC then paused new sign-ups to the existing MTD ITSA pilot in order to review its testing approach but confirmed in last week’s meeting that the trial is now open again to new participants. Readers are reminded that strict conditions must be met to participate in the current trial which also is only open to those with a 5 April accounting period end. Non-5 April accounting period ends are expected to be able to join the trial in 2024/25.  A new testing strategy was shared with stakeholders, including this Institute, earlier this year which outlined the revised trial timetable as follows:-  Small private beta testing 2023/24;   Large private beta testing 2024/25; and   Public beta testing 2025/26.   The Institute remains concerned that public beta testing will not commence until 2025/26, which therefore means that one full cycle of testing will not be completed by many taxpayers before mandation for the turnover over £50,000 population from 6 April 2026. We are also concerned at the low number of those currently participating in the trial and that this will cause delays to further elements of the trial.  HMRC is now working with software developers to transition from the previous pilot into private beta testing. Taxpayers who were in the original pilot and wish to continue can be automatically moved into the private beta.   HMRC is also working with developers to identify any new taxpayers who could join the private beta, subject to the necessary conditions being met.   According to HMRC, private beta testing is being enhanced by new support arrangements. Previously, taxpayers were guided through each MTD ITSA submission in live video calls. Taxpayers and their Agents can now make submissions without video support but can access help from a new dedicated support team by email (scmimplementationteam@hmrc.gov.uk) or phone (0300 322 9619 8am-6pm, Monday to Friday).   HMRC has also confirmed that private beta participants with an agent do not need a 64-8 authorisation form if a digital handshake is in place authorising their agent. This is limited to agents contacting the support team. 

From 1 November 2022, HMRC has announced that its online VAT return portal will close to the majority of VAT registered businesses who should be using Making Tax Digital (“MTD”) for VAT. HMRC has also now published more detailed guidance on MTD for income tax as recommended by Chartered Accountants Ireland in its response to the recent consultation on the MTD for income tax tertiary legislation. Closure of online VAT return portal From 1 November 2022, businesses and agents will only be able to file VAT returns using MTD for VAT compatible software. Businesses will no longer be able to use their existing VAT online account to file their quarterly or monthly VAT returns. However, the online VAT return will remain available to those with a digital exclusion exemption and businesses that file annual returns will still be able to use their VAT online account until 15 May 2023. VAT registered businesses must sign up to MTD for VAT and use MTD for VAT compatible software to keep their VAT records and file their VAT returns. From 24 August 2022, HMRC began contacting businesses that still need to sign up. If a business hasn’t signed up to MTD and started using compatible software already, they must follow these steps:- Step 1 - choose MTD-compatible software that’s right for your business – you can find a list of software  on GOV.‌‌‌UK. Chartered Accountants Ireland recommends you discuss this with a Chartered Accountant. Step 2 - check the permissions in your software – once you’ve allowed it to work with MTD, you can file VAT returns. Step 3 - keep digital records for current and future VAT returns. Step 4 - sign up for MTD and file future VAT returns using MTD-compatible software. MTD for income tax detailed guidance HMRC has now published more detailed MTD for income tax guidance in the following publications:- Check if you can sign up for MTD for Income Tax; Check when to sign up for MTD for Income Tax; Using MTD for income tax; and Sign up as an individual for Making Tax Digital for Income Tax.