The Institute for Chartered Accountants in England and Wales (ICAEW) has asked HMRC to "rethink" its quarterly reporting policy for Making Tax Digital for income tax self-assessment (MTD for ITSA).

Under proposed MTD for ITSA rules, self-assessment customers must keep records and submit quarterly returns using MTD-compatible software.

While the ICAEW supports tax digitalisation, it claims that quarterly reporting requirements will place a "disproportionate" administrative burden on taxpayers.

According to the ICAEW, ensuring digital records are complete and checked by quarterly deadlines could also make it harder for businesses to stay compliant.

Instead, the professional body proposes maintaining the current annual reporting cycle when MTD for ITSA rules come into effect. This could "change the narrative" of MTD and allow HMRC to focus on the impact of digitalisation.

Head of taxation strategy at the ICAEW, Frank Haskew, also expressed concerns that quarterly updates may not improve the quality of digital records. He continued:

"One of the reasons why quarterly reports are getting all the attention is because they can lead to late submission penalties. Record-keeping penalties are not being reformed despite that being the primary behaviour that needs to change."

Talk to us about Making Tax Digital.