Source · Select Committees · Public Accounts Committee
Recommendation 23
23
Accepted
Making Tax Digital will impose substantial additional financial and administrative burdens on taxpayers.
Conclusion
Overall, HMRC’s latest figures indicated that if mandatory requirements were extended to those with incomes above £10,000, then business taxpayers could have to pay 46 Qq 64–65 47 Q 78; C&AG’s Report, paras 3.12–3.13 48 Qq 90–91 49 Q 65; PTD0002, Rossmartin Tax Consultancy Limited, 19 June 2023; PTD0006, Written evidence submitted by the Association of Taxation Technicians, 19 June 2023; PTD0007, Written evidence submitted by the Institute of Chartered Accountants England and Wales, 19 June 2023; PTD0008, Written evidence submitted by the Chartered Institute of Taxation, 19 June 2023; PTD0011, Written evidence submitted by the Association of Independent Professionals and the Self-Employed, 19 June 2023, PTD0012, Written evidence submitted by Low Incomes Tax Reform Group, 19 June 2023 50 Qq 25, 45, 76 C&AG’s Report, para 3.31 51 Q79 52 Qq 79, 90 Progress with Making Tax Digital 17 a total of £1.9 billion to comply with the new arrangements over the first five years. This includes: £102 million customer costs it included in its cost-benefit analysis in its March 2023 programme business case; £640 million of customer costs it excluded from its cost- benefit analysis; and a provisional estimate of £1.2 billion for customers with incomes between £10,000 and £30,000.53 HMRC recognised the additional burden on customers that the programme creates, but told us that it expected everyone to comply with their tax obligations. It says that those who met the threshold for mandatory record keeping will have to either “grin and bear it” and do it themselves, or pay someone else to do it for them, but that it hoped that the software products available will make this easier for people than it otherwise would have been.54 53 C&AG’s Report, para 3.18 and Figure 7 54 Q 98 18 Progress with Making Tax Digital 3 The future delivery and remaining risks of Making Tax Digital HMRC’s revised timetable and contingency
Government Response Summary
The government has announced changes to simplify the design of MTD for ITSA and reassessed customer costs, with new estimates to be published in a Tax Information and Impact Note, addressing the committee's concerns about the burden on taxpayers.
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.