HMRC halt new entrants to MTD for ITSA pilot scheme until further notice

It has recently been confirmed that HMRC have temporarily closed their doors on new entrants to the MTD for ITSA pilot scheme.

Following the announcement in December, which revealed mandatory MTD for ITSA filing is to be pushed back 2 years to 2026, HMRC have said they need to refresh their testing strategy. They have promised to keep key stakeholders informed of any changes to the pilot process and how to get involved when the changes come in.

Tight requirements

At present there are less than 140 businesses participating in the pilot scheme, despite over 500 signing up to take part.

This is due to the criteria that was put in place.

Some of the stipulations included:

– Needing a 5^th April Year End
– Previously submitted at least one Self Assessment Tax Return
– Have no outstanding tax liabilities
– Not have any deductions such as pension and student loan repayments
– Not have an income tax charge such as high income child benefit

Many practitioners were already left with a small pool of clients who would want to partake which were then eliminated due to not meeting all the criteria.

Easing restrictions

It has not been confirmed what will happen and when in terms of the revised pilot, but it is thought to be more accessible and widely available for those who did not qualify on the first pilot.

This will be introduced prior to the phased mandating to allow more businesses to join and more practitioners a chance at trialing the system before it goes live.

Software

Despite not being able to make submissions, some software vendors are continuing the message that digital record keeping is still beneficial to clients. Although the number of businesses who must comply is expected to drop from 4m to around 1.8m, there is still need for them all to use a system that creates efficiencies, stores data electronically and can be accessed anywhere.

Some of the smaller software houses who have based their entire business model on MTD may struggle to survive through the delay with ‘Tax Sheets’ being the first casualty.

The larger vendors will still be developing products but feel in limbo with not knowing what requirements will be expected of them in 2026. However, many are still leaving their MTD solution open for business to allow practitioners the chance to get ahead if they wish.