Recommendation 15

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