Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Accepted
HMRC lacks detailed assessment of variable upfront transitional costs for businesses.
Conclusion
HMRC did not assess how many businesses would face different upfront transitional costs and was unable to say how many customers will face the highest upfront transitional costs or how this would vary for each income bracket. The average cost for all taxpayers affected by Making Tax Digital was expected to be £330, but was expected to be £460 for businesses that had Self Assessment incomes of between £10,000 and £30,000. However, HMRC’s highest estimate of the cost to get ready for the requirements of the programme are close to £1,000 in total.47 We therefore asked the Department what it was doing to let taxpayers know what costs to expect so that they could plan for these. It told us that it wanted to be as transparent as possible about the costs of the programme for customers, and that it had a “very strong communications plan”. It explained that the costs it published tended to be upper-range costs. HMRC told us that it wanted to be “really clear on our messaging” and that it would be ready to share these messages very soon, with a “very firm warming-up campaign so customers are aware”.48
Government Response Summary
The government has agreed to reassess customer costs for MTD and publish these estimates in a Tax Information and Impact Note in Q4 2023-24, to increase transparency and inform taxpayers of expected costs.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Target implementation date: Spring 2025 At the 2023 Autumn Statement, the government announced changes to simplify and improve the design of MTD for ITSA. These changes followed extensive collaboration with accountancy, business and landlord representative bodies, and software developers; and they were informed by research with landlords and self-employed customers. HMRC has reassessed costs to customers as a result of these changes as well as the government’s decision to retain the income threshold for mandating customers into MTD for ITSA at £30,000. This has been developed with the input of stakeholders in business and the accountancy professions as well as the Administrative Burdens Advisory Board. HMRC has also conducted a comprehensive review of the evidence feeding into estimates, bringing in the latest internal and external data available. These estimates will be published in a Tax Information and Impact Note alongside amendment regulations in the fourth quarter of 2023-24. The current MTD business case has spend approval until 31 March 2025, and the next iteration will provide a full update on costs (HMRC and customer) and the benefits of the programme in line with approvals timelines. HMRC continues to ensure that these estimates are kept under review, updated as necessary and included within ministerial advice. HMRC will also ensure that all estimates on customer costs are included in the net present value (NPV) calculation within business cases, and separate narrative and annexes, in line with National Audit Office (NAO) recommendations.