Recommendations & Conclusions
33 items
2
Conclusion
Eightieth Report - Progress with Making…
Rejected
It is unacceptable that seven years in, with £640 million of taxpayer’s money spent on the programme as a whole, so many questions remain about how Making Tax Digital for Self Assessment will work. HMRC originally intended to introduce Making Tax Digital for Self Assessment from 2018. But after just …
Government response. The government disagreed with the recommendation, stating it is not possible to robustly estimate the separate effects of frequent vs. digital submissions. They have instead applied MTD for VAT evaluation findings to MTD for ITSA, expecting a 15% tax gap …
HM Treasury
3
Conclusion
Eightieth Report - Progress with Making…
Rejected
HMRC’s design of Making Tax Digital has not taken sufficient account of the realities facing business taxpayers and agents. HMRC’s key aim for the programme is to make it easier for taxpayers to get their tax right and help reduce the amount of tax lost due to errors. While Making …
Government response. The government disagreed with the recommendation, explaining that while a priority is to make tax easy, they already engage extensively with taxpayer representatives (ABAB, expert panel, Customer Experience Committee) and conduct research to understand customer needs, publishing findings in TIINs.
HM Treasury
4
Conclusion
Eightieth Report - Progress with Making…
Accepted
In seeking further investment in the programme, HMRC has not been open enough about the substantial costs that Making Tax Digital will impose on many taxpayers. In 2021, HMRC published research that showed customers will incur both upfront transitional costs and ongoing costs when Making Tax Digital for Self Assessment …
Government response. The government agreed and stated HMRC has already reassessed customer costs for Making Tax Digital, which will be published in a Tax Information and Impact Note in Q4 2023-24. The next business case iteration will fully update on costs and …
HM Treasury
5
Conclusion
Eightieth Report - Progress with Making…
Accepted
HMRC’s poor track record of repeated delays to the Making Tax Digital programme and its lack of conviction in its latest timetable gives us little confidence that it will deliver the rest of the programme on time. HMRC’s original delivery timetable for the programme was not realistic and did not …
Government response. The government agreed and stated that the MTD for ITSA timetable was set following detailed internal planning and shared detailed plans/roadmaps with external partners. HMRC has also sought feedback on communication plans and is supporting beta testing to ensure preparedness.
HM Treasury
6
Conclusion
Eightieth Report - Progress with Making…
Accepted
We are concerned that the repeated delays and poor design of the Self Assessment phase of the programme is deterring software providers from developing quality 8 Progress with Making Tax Digital products and will ultimately put customers at risk. Over 500 software products are available for Making Tax Digital for …
Government response. The government confirms it does not accredit software but operates a recognition process. It commits to listing approved software on a "Software Choices webpage" before MTD for ITSA and states it can remove problematic software from its systems, fulfilling the …
HM Treasury
1
Conclusion
Eightieth Report - Progress with Making…
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on the issue of its progress with Making Tax Digital.1
Government response. The government details existing robust governance processes for the Making Tax Digital programme, including Senior Responsible Owner (SRO) accountabilities, quarterly reports, and significant internal scrutiny mechanisms.
HM Treasury
7
Conclusion
Eightieth Report - Progress with Making…
Rejected
HMRC also told us about the external events that contributed to the delays in the programme’s delivery. These included EU Exit and the COVID-19 pandemic’s impact on business taxpayers’ readiness and engagement, and government policy announcements, in particular the Health and Social Care Levy in 2021.13 HMRC told us that …
Government response. The government disagrees with the committee’s implicit finding of £1.75 billion in missed tax revenue due to MTD for Self-Assessment delays, providing its own OBR-certified benefit forecasts for MTD for ITSA.
HM Treasury
8
Conclusion
Eightieth Report - Progress with Making…
Accepted
Delivering the programme for Self Assessment is much more complex than for VAT. There are an estimated 11 million Self Assessment tax records that will need to be quality checked and moved to HMRC’s new system, 7.8 million more than for VAT.17 The calculation of an income tax liability has …
Government response. The government agrees with the committee’s implicit recommendation to address delivery challenges, stating that it has already implemented measures. HMRC has assured its MTD delivery plan, secured funding, and is developing contingency plans, and has commissioned a data quality assessment …
HM Treasury
9
Conclusion
Eightieth Report - Progress with Making…
Rejected
We asked HMRC to explain what Making Tax Digital was expected to deliver for the taxpayer, Exchequer and HMRC when the programme was launched in 2015. It said that Making Tax Digital aimed to make it easier for small businesses and landlords to get their tax right by requiring them …
Government response. The government rejects the committee's observation, stating that it's not possible to robustly disaggregate the effects of MTD components, and presents evidence from MTD for VAT and OBR-certified MTD for ITSA benefits showing significant tax revenue reduction from error and …
HM Treasury
10
Conclusion
Eightieth Report - Progress with Making…
Rejected
We received written evidence from taxpayer and agent representatives that expressed their concerns over the additional burdens that Making Tax Digital would impose on businesses and taxpayers. For example, Crundell & Co Accountancy Ltd told us that Making Tax Digital for VAT increased administrative burdens and cost to taxpayers and …
Government response. The government rejects the committee's observation regarding additional burdens, stating its priority to make tax easy must balance with raising revenue and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer …
HM Treasury
11
Conclusion
Eightieth Report - Progress with Making…
Rejected
We asked HMRC about the burdens that the Self Assessment programme would place on small businesses. HMRC told us that it had heard the same concerns ahead of the introduction of the programme for VAT as now existed for Self Assessment.25 It told us that, while “the prospect of it …
Government response. The government rejects the committee's observation regarding burdens on small businesses, asserting its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It describes ongoing engagement with taxpayer representatives and recent enhancements to policy …
HM Treasury
12
Conclusion
Eightieth Report - Progress with Making…
Rejected
We asked HMRC to explain what exactly it was aiming for with the introduction of quarterly updates through digital record keeping, given it was a source of concern for its stakeholders. HMRC said its aim was for customers to keep records in near real-time to help close the tax gap. …
Government response. The government rejects the committee's observation regarding the aim of quarterly updates, reiterating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It details continuous engagement with taxpayer representatives and improved internal processes …
HM Treasury
13
Conclusion
Eightieth Report - Progress with Making…
Rejected
We also received written evidence from the Low Incomes Tax Reform Group (LITRG), which told us that going back as early as 2016 it had repeatedly raised concerns about the additional cost and administrative burden Making Tax Digital will add to taxpayers, especially those on lower incomes or who find …
Government response. The government rejects the committee's observation regarding concerns for vulnerable taxpayers and support, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It references ongoing engagement with taxpayer representatives and enhanced policy …
HM Treasury
14
Conclusion
Eightieth Report - Progress with Making…
Rejected
We asked HMRC, given the concerns about additional burdens on customers, how it would ensure that businesses complied with the programme and compliance didn’t decline. HMRC explained that there were two key requirements that it believed will foster good compliance from business taxpayers using software. The first was a requirement …
Government response. The government rejects the committee's observation on ensuring compliance, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer …
HM Treasury
15
Conclusion
Eightieth Report - Progress with Making…
Rejected
Many of the programme’s stakeholders support the idea of digitalising the tax system.34 We received written evidence from The Association of Tax Technicians (ATT), which told us that it welcomed digital record keeping and the modernisation of the tax system but that it remained concerned about the deliverability of the …
Government response. The government rejects the committee's observation on stakeholder support for digitalization and concerns about deliverability, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and …
HM Treasury
16
Conclusion
Eightieth Report - Progress with Making…
Rejected
The NAO found that the success of the programme for Self Assessment will in part depend on working effectively with tax professionals to ensure smooth design, delivery and implementation of the programme. However, many stakeholders including HMRC’s own Administrative Burdens Advisory Board, which independently provides critical support to HMRC in …
Government response. The government rejects the committee's observation regarding effective collaboration with tax professionals, stating its priority to make tax easy must balance with raising revenue and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes …
HM Treasury
17
Conclusion
Eightieth Report - Progress with Making…
Rejected
In December 2022, HMRC established a plan to work with its stakeholders to solve issues. In March 2023 it started exploring with taxpayer and agent representatives how quarterly updates could work in practice. It explained that it was looking to adopt a “co- creation” approach where it asked taxpayers how …
Government response. The government rejects the committee's observation on HMRC's plans for working with stakeholders, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy …
HM Treasury
18
Conclusion
Eightieth Report - Progress with Making…
Rejected
Stakeholders such as the Low Incomes Tax Reform Group (LITRG) remain concerned about how realistic HMRC’s plans for implementation are as well as HMRC’s lack of concern or planning for low income and vulnerable taxpayers.41 We also heard that stakeholders had fed back issues and worries about the programme on …
Government response. The government rejects the committee's observation regarding ongoing stakeholder concerns about implementation and support for vulnerable taxpayers, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer …
HM Treasury
19
Conclusion
Eightieth Report - Progress with Making…
Accepted
HMRC originally expected that Making Tax Digital would reduce the burden of submitting tax returns on customers. In June 2023, the NAO reported that HMRC now forecast that complying with the programme will create additional costs for customers, and that it had significantly understated these costs in its cost-benefit analysis …
Government response. The government has agreed to reassess and publish customer costs for MTD for ITSA, including them in the net present value calculation of future business cases as per NAO recommendations. This follows recent design changes and revised income thresholds for …
HM Treasury
20
Conclusion
Eightieth Report - Progress with Making…
Accepted
We asked HMRC why it omitted significant costs from the cost-benefit analysis it included in its May 2022 business case, and whether the decisions made on the basis of the business case would have been the same if this information had been included. HMRC said that it had made “a …
Government response. The government agrees to reassess and publish MTD customer costs and ensure all estimates are included in the Net Present Value calculation of future business cases, addressing the committee's observation of past omissions due to 'technical interpretation error'.
HM Treasury
21
Conclusion
Eightieth Report - Progress with Making…
Accepted
HMRC did not assess how many businesses would face different upfront transitional costs and was unable to say how many customers will face the highest upfront transitional costs or how this would vary for each income bracket. The average cost for all taxpayers affected by Making Tax Digital was expected …
Government response. The government has agreed to reassess customer costs for MTD and publish these estimates in a Tax Information and Impact Note in Q4 2023-24, to increase transparency and inform taxpayers of expected costs.
HM Treasury
22
Conclusion
Eightieth Report - Progress with Making…
Accepted
In December 2022 Ministers took the decision to delay the inclusion of taxpayers with Self Assessment incomes below £30,000 in Making Tax Digital due to concerns about customer costs and burdens. Many of HMRC’s stakeholders have welcomed this decision.49 However, HMRC could not tell us its plans to provide specific …
Government response. The government has established an expert panel to consult on digital improvement ideas and provide specific support for vulnerable or digitally excluded customers, addressing the committee's concern about a lack of plans for these groups.
HM Treasury
23
Conclusion
Eightieth Report - Progress with Making…
Accepted
Overall, HMRC’s latest figures indicated that if mandatory requirements were extended to those with incomes above £10,000, then business taxpayers could have to pay 46 Qq 64–65 47 Q 78; C&AG’s Report, paras 3.12–3.13 48 Qq 90–91 49 Q 65; PTD0002, Rossmartin Tax Consultancy Limited, 19 June 2023; PTD0006, Written …
Government response. The government has announced changes to simplify the design of MTD for ITSA and reassessed customer costs, with new estimates to be published in a Tax Information and Impact Note, addressing the committee's concerns about the burden on taxpayers.
HM Treasury
24
Conclusion
Eightieth Report - Progress with Making…
Not Addressed
HMRC received approval from government in December 2022 to delay and rephase the Making Tax Digital programme for its Income Tax Self Assessment (Self Assessment) customers.55 This gave HMRC a further two years to finalise the programme before introducing it for taxpayers with incomes over £50,000 from April 2026 and …
Government response. The government response reiterates the previously announced delays and revised phased rollout for Making Tax Digital, but does not address the committee's observations about lessons learned, contingency planning, or confidence in preventing further delays.
HM Treasury
25
Conclusion
Eightieth Report - Progress with Making…
Accepted
In order to deliver the programme, HMRC still has: some difficult design issues to work out and fix; to fully run an unrestricted pilot to test systems and customer journeys; to test, cleanse and move Self Assessment taxpayer data in time for that pilot and mandation; and build in time …
Government response. The government has implemented specific design changes for MTD, including a revised customer journey for jointly-held property and a commitment to allow multiple agents by April 2026, and updated eligibility criteria for beta testing, addressing outstanding design and pilot issues.
HM Treasury
26
Conclusion
Eightieth Report - Progress with Making…
Accepted
We also received written evidence that highlighted some significant areas that needed design and technical solutions before the programme can be delivered.63 ICAEW’s written evidence said that currently the criteria for joining the pilot were too restrictive – which meant that HMRC could not expand its testing beyond basic functions …
Government response. The government has addressed key design and technical issues for MTD, including a revised journey for jointly-held property, updated pilot eligibility criteria, and a commitment to allow multiple agents by April 2026.
HM Treasury
27
Conclusion
Eightieth Report - Progress with Making…
Accepted
HMRC told us that it was aiming to have built sufficient functionality to be ready for an unrestricted and open pilot of the programme for Self Assessment 12 months before it is to be introduced as a mandatory requirement for the first cohort of customers in 2026 (for those with …
Government response. The government has updated eligibility criteria for the MTD beta testing phase and committed to continuing private beta testing in 2024-25 and a public beta in 2025-26, aligning with HMRC's plans for an unrestricted pilot.
HM Treasury
28
Conclusion
Eightieth Report - Progress with Making…
Accepted
A significant task for HMRC is to move taxpayer data from its old Self Assessment system to its new tax system. HMRC told us that its old legacy systems hold records in a fundamentally different way, and it had expected the conversion into the new system to be simpler than …
Government response. The government has commissioned a data quality assessment of Self-Assessment data held on legacy systems by specialist companies, providing technical assurance for the significant and complex task of moving taxpayer records.
HM Treasury
29
Conclusion
Eightieth Report - Progress with Making…
Accepted
We heard from HMRC and written submissions from the programme’s stakeholders, including those from the software industry, that a key requirement for the success of the programme was for HMRC to work effectively with the software industry.69 Software providers told us they had struggled to design products for more complex …
Government response. The government agrees with the conclusion, stating it has already implemented a response by detailing existing end-to-end service guides for software developers that are continuously reviewed. HMRC is also reviewing minimum functionality standards to foster innovation and adapts its approach …
HM Treasury
30
Conclusion
Eightieth Report - Progress with Making…
Acknowledged
We asked the Department if it accepted that the changing timeline of the programme undermined those who were developing a business around the requirements of the programme. HMRC recognised that the repeated delays to the programme’s delivery had been unwelcome and had knocked confidence in the programme among those in …
Government response. The government agrees with the conclusion, recognising the importance of certainty for MTD delivery partners and customers. It highlights the December 2022 announcement of the phased MTD for ITSA timeline, ongoing detailed planning and roadmap sharing, and continued engagement on …
HM Treasury
31
Conclusion
Eightieth Report - Progress with Making…
Acknowledged
We asked HMRC if it was concerned repeated delays would limit the number of software providers willing to develop products for taxpayers, and whether this could create a barrier for taxpayers using the programme. It told us it was worried about this, and it recognised that the announcements in December …
Government response. The government agrees with the conclusion, acknowledging the need for certainty and assurance for MTD delivery partners and customers. It outlines the December 2022 announcement of the phased MTD for ITSA timeline, ongoing detailed planning and roadmap sharing, and continuous …
HM Treasury
32
Conclusion
Eightieth Report - Progress with Making…
Accepted
HMRC told us that it accredits Making Tax Digital software products so that someone selecting that product knows it has been tested against HMRC systems and if they use it correctly it will successfully submit their information. It also provides information about the costs and the functionality within those product …
Government response. The government agrees with the conclusion, clarifying that HMRC operates a 'production approvals process' rather than accreditation for software, based on API specifications and testing. It states approved MTD for ITSA software will be listed on a Software Choices webpage …
HM Treasury
33
Conclusion
Eightieth Report - Progress with Making…
Acknowledged
As well as having significant parts left to design and test and have the software development industry buy into and build products, HMRC also needs to plan how it will communicate these changes to its customers. HMRC told us that it had a very strong communication plan and it was …
Government response. The government agrees with the conclusion, recognising the importance of certainty in the MTD delivery plan. It outlines ongoing efforts, including sharing detailed plans and a roadmap with partners, seeking feedback on communication plans, and short-term focus on beta testing, …
HM Treasury