HMRC seeks AAT members’ views over MTD for ITSA threshold

aat comment

Members meet with HMRC to chart the way forward for businesses below the £30,000 threshold.

Making Tax Digital for Income Tax and Self Assessment (MTD for ITSA) may be delayed from 2024 to 2026, but that doesn’t mean little will happen for two years. Far from it: important decisions are being shaped now, and our members have been playing a role in this alongside our public affairs team as we seek to bring the ideas and insights of the whole AAT community to bear.

A recent example was HMRC reaching out to AAT about how best to deal with businesses with a turnover of under £30,000. They were keen to meet members who have small business and landlord clients falling within this band.

We know our licensed members are particularly concerned about this, and it’s one of the most important areas for refinement and improvement within MTD for ITSA. We were delighted by the strong response to HMRC’s invitation, resulting in a significant number of members who were willing to attend the meeting, or feed in experiences and ideas.

Members raise communication concerns

Members raised several topics with HMRC, including the lack of direct communication with businesses about coming changes.

As 2022 drew to a close, there was growing unease that the Government was relying too much on accountants and vendors to deliver the message that small businesses would soon face substantial changes in tax compliance.

Lucy Cohen of licensed firm Mazuma Accounting, and a member of AAT Council, was happy for her comments during the meeting to be reported. Here’s what she told me:

“When they asked what they could do to make the introduction smoother, I told them they needed to develop a strategic and substantial marketing campaign for taxpayers to let them know this is coming.

“We need their support so everyone can get the outcome they want. HMRC has to get the messaging right, because the audience that needs to understand MTD [sole traders and the self-employed] won’t be reading letters from HMRC,” Lucy says.

A joined-up approach is needed

There’s no doubt resources are already stretched within Government departments. But the next stage of MTD represents such a significant change it requires a budget allocation for communication. This is no ‘nice to have’, but a fundamental requirement to allow for proper consultation, awareness-building and support.

MTD for ITSA could and should be an opportunity. If it’s designed and implemented well, it has the potential to be a step change towards a modern and efficient tax system. Lucy confirms, “I was encouraged by the general consensus on the call that we could see its benefits over the longer term, whether that be in areas like service to taxpayers or clients, or record keeping.”

Take the opportunity

Accountants will play a critical role in shaping MTD’s future so I would encourage all members to continue their engagement with the process.

“Speak to your clients about it now,” says Lucy. “Worst case scenario is that you do all the prep and the transition onto new systems so your client is better served; and if it doesn’t go ahead, it still won’t do you any harm – you’ve developed your practice and made it better. So don’t look at this as something HMRC are making you do – look at it as something you should be doing as your practice and business development efforts.”

Have your say

HMRC is open to further ideas about how best to work with small businesses. It wants to consider other ideas for rolling out MTD for ITSA to this community, such as streamlining reporting requirements, changing the threshold or excluding them altogether.

I urge members to get involved by speaking to us at AAT, too. Our public affairs team meets regularly with HMRC and we are dedicated to ensuring members’ voices are heard by HMRC and Government on this important policy. If you want to share your thoughts about how this policy will affect your business and clients, please contact Jack Withrington so we can include them in our discussions with policymakers.

Adam Harper is AAT's Director of Professional Standards & Policy..

Related articles