Tax practitioners remain sceptical of Government’s flagship digital tax proposals

4 Aug 2023

Concerns remain around the proposed introduction of digital record keeping and reporting requirements for many income taxpayers, according to a Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) survey.

The survey sought members’ views on the feasibility of the April 2026 start date for Making Tax Digital (MTD) for Income Tax Self-Assessment (MTD for ITSA),1 the potential benefits of the various aspects of MTD reporting, the impact of MTD requirements on agents, and their thoughts on MTD for VAT now it is up and running for that tax.

Over 500 members responded, with many showing continued concerns about MTD:

  • 70% thought April 2026 was still an unrealistic start date
  • 95% were not confident about HMRC’s ability to oversee the introduction of MTD for ITSA
  • 87% doubted it would achieve the stated goal of closing the tax gap
  • Over half said that the MTD ITSA proposals had significantly adversely affected their trust in the tax system as a whole

The full results of the survey can be found on the CIOT and ATT websites.2

Alison Kerrey, chair of the joint CIOT/ATT Digitalisation & Agent Services Committee, said:

“The responses from this survey make for worrying, although not surprising, reading. Despite the start date being postponed for two-years to April 2026 and the introduction being phased based on income levels, tax agents are still very concerned about the impact which the MTD ITSA proposals will have on them and their clients.

“HMRC’s insistence that MTD will make lives easier, as well as closing the tax gap, continues to be met with scepticism. There is a real lack of confidence that a convenient, user-friendly and effective system will be ready to go by April 2026.

“Worse still, this survey shows that the tax profession is simply not seeing the value of MTD. In particular, members have seen no improvement in accuracy of VAT returns, or increased productivity, since the introduction of MTD for VAT, but report increases in compliance costs.

“The profession is keen to embrace digitalisation where this delivers benefits for their clients and their firms, as evidenced by the significant levels of online filing of Self-Assessment returns. However, HMRC must do more to must retain the faith and confidence of the large numbers of UK taxpayers affected by this change, and their agents.”

The government is undertaking a review of the needs of smaller businesses with respect to MTD for ITSA, to which the CIOT and ATT have contributed. The survey also asked whether those businesses with turnover below £30,000 should be included within MTD for ITSA:

  • 86% of respondents were opposed to extending MTD for ITSA to taxpayers with incomes under £30,000.
  • 87% stated that quarterly reporting will be of no use to those small businesses.

Alison Kerrey continued:

“Tax professionals are clearly strongly opposed to extending the MTD for ITSA requirements to businesses and landlords with incomes below £30,000, seeing little to no benefit in quarterly reporting requirements and many of the other ‘pillars’ of MTD. The CIOT and ATT will continue engaging with HMRC to help MTD for ITSA become an effective, relevant and user-friendly system.”

Notes for editors

  1. MTD for ITSA will require businesses to keep digital records and use MTD-compatible software to file quarterly updates of their income and expenses with HMRC, in addition to their current annual tax filing requirements.
    In December 2022, the Government announced that the proposed introduction of Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) for sole traders/landlords would be postponed from April 2024 to April 2026. Those with income above £50,000 would be mandated from that date, with those whose income is above £30,000 joining in April 2027.
  2. Making Tax Digital – CIOT and ATT survey.