HMRC has temporarily paused the Making Tax Digital for income tax self-assessment (MTD for ITSA) pilot for newcomers.

In a statement to AccountingWeb, an HMRC official said the decision would allow the tax authority to refresh its testing strategy. They also plan to keep stakeholders updated about changes to the pilot process and how to get involved.

At the moment, only 137 businesses are part of the pilot - down from around 500 before the Covid-19 pandemic began.

The drop in participation can be partly attributed to HMRC introducing tighter criteria for the pilot in January last year. Although these restrictions loosened slightly in July, only businesses with a 5 April year-end could participate.

Furthermore, the tax authority told the Institute of Chartered Accountants in England and Wales (ICAEW) that this restriction will continue to apply until 2024.

While there is currently no set date for when the pilot will reopen, a spokesperson confirmed that HMRC will build up the pilot ahead of MTD for ITSA rules coming into effect in 2026.

There are also plans to expand the pilot to "allow many more businesses to join as the system develops further before phased mandation begins."

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