Source · Select Committees · Public Accounts Committee
Recommendation 32
32
Accepted
HMRC expects MTD to increase taxpayer burdens to enhance compliance and productivity, generating revenue.
Conclusion
We asked HMRC why MTD will increase the burdens on self assessment business taxpayers. It told us the costs MTD will impose on a business will vary depending on the degree to which they already used business accounting software. Those that currently do not use business accounting software will face higher costs but their digitalisation through MTD should increase their productivity as well as their tax compliance. HMRC said MTD would generate £4 billion of additional tax revenue by 2029–30 as a significant number of taxpayers had not been complying. We asked why customers who were already compliant were facing an additional burden from MTD. HMRC explained that “the approach that we and successive 58 Committee of Public Accounts, Progress with Making Tax Digital, Eighteenth Report of Session 2022–23, HC 1333, 24 November 2023, p 3 59 C&AG’s Report, para 3.15 60 C&AG’s Report, para 3.15 61 HM Treasury, Autumn Budget 2024: Fixing the foundations to deliver change, HC 295, October 2024, para 5.21 62 Correspondence from HMRC, 19 March 2025 63 Qq 72–73 64 Correspondence from HMRC, 19 March 2025 18 Governments have adopted is one of a universal drive to encourage small businesses to improve their record–keeping and to improve their use of software.” 65
Government Response Summary
The government states it has implemented the recommendation by conducting regular customer and user research to understand needs and perspectives, and by using this insight in its design processes and impact assessments.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative surveys, with thousands of customers each year. In 2024-25, HMRC delivered 18 commissioned and 15 in-house social research projects. Additionally, user research is a core activity of HMRC’s digital programmes. In 2024-25 HMRC conducted user research with 1,835 participants. Findings were used to inform design decisions on products and services. 5.3 HMRC currently uses customer and user insight as part of its end-to-end change lifecycle for designing new services or making changes to existing ones. This is a critical aspect of design to ensure the department builds solutions that address customer needs and a foundation for evaluating the impact of the service to identify areas of improvement or new opportunities for innovation. 5.4 As part of its business case process, HMRC assesses formal change against Customer Guardrails, a framework for ensuring customer needs are thoroughly considered. Evidence of identified customer needs, including assessment of impacts on customer costs and benefits, is then recorded through completion of an External Customer Impact Assessment document. This forms part of the documentation required by HMRC governance boards. 5.5 Customer impacts are published in the ‘Summary of Impacts’ section of Tax Information and Impact Notes (TIINs). Where a measure or policy change is driven by customer need, this can be set out in the ‘Background to measure’ or ‘Policy objective’ sections of a TIIN as appropriate.