Source · Select Committees · Public Accounts Committee
Recommendation 17
17
We also received written evidence from the Chartered Institute of Taxation, which highlighted the findings...
Conclusion
We also received written evidence from the Chartered Institute of Taxation, which highlighted the findings of a survey of businesses and agents with an interest in the programme that they had carried out jointly with the Association of Taxation Technicians during December 2019 and January 2020.40 The findings of the survey suggested that the costs of Making Tax Digital compliance had far exceeded government estimates. While HMRC had estimated the average transition costs to be £109 per VAT-registered business, less than 10% of respondents estimated their or their clients’ costs at or below that amount, with 45% estimating costs between £109 and £500, and some 12% estimating costs over £5,000.41 33 Q 17 34 Q 47 35 Qq 20, 45; C&AG’s Report, Appendix Four 36 Qq 20–21, 69 37 C&AG’s Report, paras 1.11, 3.4 38 Qq 20, 67; HM Revenue & Customs and HM Treasury, Building a trusted, modern tax administration system, 21 July 2020 39 Qq 66–67 40 TTG003 - Chartered Institute of Taxation para 4.21 41 Findings of the survey available at: www.tax.org.uk/media-centre/press-releases/press-release-survey-results- contradict-government-claims-realising Tackling the tax gap 15 Small businesses
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.