The CPAA is a not-for-profit organisation and professional body for accountants. It is calling on the Government to scrap the requirement for quarterly reporting within the plans for Maxing Tax Digital for Income Tax Self-Assessment (MTD for ITSA).

What we want

One tax return

MTD for ITSA will require taxpayers who normally complete a self-assessment return to make five tax returns a year. We believe this requirement is unnecessarily complex and increases the burden of compliance. We are calling for MTD for ITSA to require just one single tax return, as per the current self-assessment regime.

Incentivise not penalise

In an increasingly digital world, we see the merit in digital record keeping and believe this should be retained as part of MTD. However, we want the Government to rethink the penalty regime. We urge measures to be adopted that incentivise digital filing, rather than penalising those unable to maintain records digitally.

Communication and education

We are calling upon the Government to raise public awareness of MTD and its obligations. If digital recordkeeping is to be mandated, the public must be equipped with the skills needed to comply. Free resources should be made available to taxpayers and included within financial education in secondary schools.

Why we think quarterly reporting should be scrapped

In a recent survey, 97% of the CPAA members polled stated that quarterly reporting would be very or moderately challenging for their practice and clients. Almost 9 out of 10 members believe MTD will have a detrimental effect on smaller clients. Two-thirds of those surveyed felt digital filing would not be an improvement over the current system.

In summarising the biggest challenges to MTD, the majority of respondents pointed towards their clients. They stated reasons like “getting clients to change their working practices” and pointed out that “it’s more cost to the client for very little benefit.”

In an open-ended question asking how MTD will benefit practitioners, the overwhelming sentiment of the response concluded that there would be no benefit. Comments included “it [MTD] will undoubtedly lead to more confusion than order” and that they “do not see any benefit for either myself [accountant(s)] or my clients.”

Quarterly reporting places a disproportionate administrative burden on taxpayers to keep their records up to date. We fear this will push many smaller self-employed into the grey economy as they are unable or unwilling to meet the demands of quarterly reporting. This will simply widen the tax gap.

For accountancy practitioners, quarterly reporting will place major demands on their practices. Many will be unable to service their existing client base without expanding their practices, which will lead to increased costs for taxpayers.

Government services should be user-friendly and human focused. Current service levels at HMRC are substandard, with this being acknowledged by Jim Harra, Chief Executive Officer of HMRC at the 2023 stakeholder conference. Given these failings, it is reasonable for MTD to be revisited and reconsidered.

The tax system should operate in the public interest and incentivise economic activity. Quarterly reporting will place additional and unnecessary burdens on businesses, who must already comply with a range of legislation and regulations. HMRC’s current stated aim is not to introduce quarterly payment, therefore quarterly reporting seems to have little to no benefit for HMRC, while causing significant disruption to businesses and taxpayers.

Victoria Atkins, the Financial Secretary to the Treasury, has commented on MTD that “it is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.” We do not believe that the current solution will work for everyone.

Given the acknowledged failings at HMRC, the concerns raised by accountants, and the current challenges faced by UK businesses; it is reasonable for MTD to be revisited and reconsidered. Policy decisions made seven years ago are not still appropriate today and demand a fresh approach.

Our petition calls for an urgent review, taking this opportunity to reflect and seek guidance from the accountancy profession, in order to make meaningful changes to MTD for ITSA.