Recommendation 3

HMRC’s design of Making Tax Digital has not taken sufficient account of the realities facing business taxpayers and agents. HMRC’s key aim for the programme is to make it easier for taxpayers to get their tax right and help reduce the amount of tax lost due to errors. While Making Tax Digital will substantially benefit HMRC by improving its systems, taxpayers will be asked to spend more and do more to comply. HMRC has lost sight of its original aim to reduce the burden on taxpayers and is increasing the burdens it imposes by asking Self Assessment taxpayers to pay for third party software and file tax returns quarterly. Many stakeholders, including tax experts and software developers, report that up until 2023 HMRC had ignored their advice, including on what the programme needs to do to work for taxpayers. HMRC has increased its engagement with these stakeholders, but this only started in early 2023. Some stakeholders remain concerned about the engagement from HMRC on the design of the Self Assessment system and the impact on customers. Recommendation 3a: In addition to Making Tax Digital, HMRC should research what services customers would find most helpful, drawing on customer views as well as international research, and publish its findings by Autumn 2024. b) HMRC should ensure that all its future proposals for digitalising the tax system: start with what taxpayers need; are demonstrably better for them than existing arrangements; and the plans are supported and therefore can be championed by taxpayer representatives, including its own Administrative Burdens Advisory Board.