Select committee: Public Accounts Committee
Conclusion 28
23rd Report - The cost of the tax system
Published 30 Apr 2025
Addressed to HM Treasury
Public Accounts Committee The cost of the tax system All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
HMRC launched its flagship transformation programme Making Tax Digital (MTD) in 2015–16. MTD requires business taxpayers to use third–party software to keep and submit quarterly digital tax records with the aim of: reducing the amount of tax lost from taxpayers making avoidable or careless errors; helping businesses better understand their tax position; and reducing the burden of submitting tax returns.53 HMRC completed the roll–out of MTD for VAT in 2022. HMRC estimated that MTD had increased net costs for VAT traders by around £300 million over the period 2019–20 to 2023–24.54 It also estimated that tax revenue from VAT traders increased by almost £200 million in 2019–20 (at that point not all VAT traders were using MTD).55 There is no strong evidence to date to suggest productivity improvements for most VAT traders following the introduction of MTD.56 HMRC consider that the productivity of small businesses will benefit more generally from the process of digitalisation.57
From: Public Accounts Committee, 23rd Report - The cost of the tax system (HC 645), 30 April 2025
Government response
The government responded to the whole report on 18 September 2025.
Summary written by Accountability Index from the government's response. It is not the government's own words.The government states that it "agrees with the Committee's recommendation" on each of the report's recommendations, and reports that several are already implemented while others carry target dates.
- On simplification, the government will publish HMRC's Transformation Roadmap in summer 2025, which "will include the metrics HMRC will use to report progress".
- On trust, the government agrees with both recommendations and describes them as "Recommendation implemented", citing annual customer surveys, complaints data and focus groups.
- On compliance productivity, it says HMRC "will recruit an additional 5,500 compliance staff by March 2030", alongside other measures to close the tax gap.
- On legacy IT, HMRC "will write to the Committee" on its remediation plans, forecast cost and expected savings, with a target implementation date of September 2025.