Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
Set out how HMRC will balance software product quality, safety, and liability for taxpayers.
Conclusion
We are concerned that the repeated delays and poor design of the Self Assessment phase of the programme is deterring software providers from developing quality 8 Progress with Making Tax Digital products and will ultimately put customers at risk. Over 500 software products are available for Making Tax Digital for VAT, which can make it difficult for customers to make an informed choice about what to use. It also makes it hard for HMRC to conduct timely reviews of the quality of products and legitimacy of the providers. Stakeholders report that some software available has unexplained features that can lead to incorrect reporting. Customers can feel overwhelmed, and stakeholders have raised concerns about the security and safety of the products on offer, as well as some unexplained features and hidden costs. HMRC expects the number of software products for VAT to reduce but could not tell us whether it plans to introduce further quality measures to ensure software meets its accreditation standards. Delays and uncertainty to the Self Assessment rollout have likely played a role in software providers becoming increasingly hesitant to continue their investments into developing products for the programme. This has led to some providers pulling products from the market or reducing their investment in developing products for Self Assessment. We are concerned that these delays and attrition amongst software providers could result in higher prices or lower the quality of product on offer to taxpayers. HMRC’s lack of proper accreditation checks leaves us concerned about where responsibility and liability fall in the event of software or cyber security failures. HMRC did not say who would be liable if something went wrong but does not expect to penalise customers if there was an error in their tax submissions because of a software issue. Recommendation 6a: HMRC should, within three months, write to the Committee and set out how it will ensure that it strikes the right balance b
Government Response Summary
The government confirms it does not accredit software but operates a recognition process. It commits to listing approved software on a "Software Choices webpage" before MTD for ITSA and states it can remove problematic software from its systems, fulfilling the committee's request for how it ensures balance.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented The government has provided a full response to the Committee in the following paragraphs. Following the Committee’s June 2023 hearing, HMRC corrected oral evidence in a letter dated 29 June 2023, including confirmation that it does not accredit software. Instead, HMRC operates a recognition or “production approvals process” to assure users that software meets its requirements. Approval depends on software meeting API specifications and undergoing testing. Developers are also required to accept HMRC’s software terms of use, covering data security requirements, encryption policies, and data-access controls. Before introducing MTD for ITSA, HMRC will list approved software which meets minimum functionality standards on a Software Choices webpage, helping customers to choose the most suitable product for them. HMRC has a proven software integration model, which ensures commercial products meet with HMRC’s technical specifications and can integrate seamlessly with its systems. MTD for VAT has an ecosystem of over 500 commercially available products, catering to diverse customer needs and budgets. Calculation of tax liabilities and the application of penalties remain a function of HMRC, using its own systems. However, HMRC has robust processes to protect taxpayers if, for example, they believe a software error has resulted in a penalty. This includes review and appeals processes. HMRC would also investigate any such cases, ensuring any detrimental customer impacts are addressed. Should a major problem affect MTD software, HMRC can ultimately remove the ability of that product to upload updates to HMRC's systems, safeguarding customers and developers until problems are resolved.