Source · Select Committees · Public Accounts Committee
Recommendation 15
15
HMRC is implementing an ambitious initiative, Making Tax Digital, to help tackle error and failure...
Conclusion
HMRC is implementing an ambitious initiative, Making Tax Digital, to help tackle error and failure to take reasonable care, particularly in the small business population. Small businesses accounted for the largest share of the tax gap (£13.4 billion; 43%) in 2018–19.35 They will be required to use accounting software to keep accurate and up-to- date records, and the software will produce filings that will feed into HMRC’s systems.36 HMRC has introduced Making Tax Digital for VAT.37 In July, the government announced an extension of the programme, throughout 2022 and 2023, to other taxpayers and tax types. The government plans to extend the programme, from April 2022, to all VAT payers and then from April 2023 to businesses and landlords with income over £10,000 per annum which are liable for Income Tax.38
Government Response
Not Addressed
HM Government
Not Addressed
5.1 The government agrees with the Committee’s recommendation. Ta rget implementation date: Summer 2021 5.2 In July 2020, the government published Building a trusted, modern tax administration system, a vision for the future of tax administration, designed to improve resilience and effectiveness. This included an expansion of Making Tax Digital (MTD) to the remaining VAT population from April 2022; and to unincorporated businesses and landlords with over £10,000 total business and property income for Income Tax from April 2023. 5.3 MTD helps to reduce avoidable mistakes which cost over £8.5 billion in 2018-191. MTD also enables businesses to see a real time picture of their finances and facilitates increased productivity. Businesses using MTD VAT software are already benefiting from improved working practices as well as wider productivity gains and reductions in input errors2. During the COVID-19 pandemic, many have turned to digital tools and an extension of MTD aims to meet the needs of the increasingly digitally engaged business population. 5.4 Costs will vary from business to business, being dependent on factors such as business size, complexity, degree of digital capability and the cost and functionality of the software used. Free software products may suit businesses with the simplest affairs; many businesses will be able to achieve MTD compliance at minimal cost. 5.5 Since the July 2020 announcement, HMRC has undertaken significant engagement with business and accountancy representative bodies and software developers in order to further understand the associated costs of future MTD mandation. HMRC continues to work with stakeholders to ensure estimates are accurate and will do all it can to minimise costs. Revised estimates will be published in due course.