Source · Select Committees · Public Accounts Committee
Recommendation 29
29
Accepted
HMRC's restrictions hinder software industry's ability to develop products for Making Tax Digital.
Conclusion
We heard from HMRC and written submissions from the programme’s stakeholders, including those from the software industry, that a key requirement for the success of the programme was for HMRC to work effectively with the software industry.69 Software providers told us they had struggled to design products for more complex customer scenarios due to restrictions HMRC imposed on pilot entrants and its product testing facility.70 Evidence sent to us by APARI Software Ltd said that despite the Self Assessment pilot running for five years, it had failed to deliver the scale and testing needed for proper product development and therefore a lot of the new technology HMRC had invested in (to allow Making Tax Digital to work) had so far not been used or tested.71
Government Response Summary
The government agrees with the conclusion, stating it has already implemented a response by detailing existing end-to-end service guides for software developers that are continuously reviewed. HMRC is also reviewing minimum functionality standards to foster innovation and adapts its approach based on stakeholder feedback.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 The government has provided its full response in the following paragraphs, together with HMRC’s end-to-end service guides for both MTD for ITSA and VAT. 6.3 These guides set out in detail how developers should produce software for MTD, including: • how to integrate software with HMRC’s systems; • how software aligns with various end-to-end users; and • HMRC’s criteria for allowing an MTD product to be listed on its software choices page. 6.4 These guides are continuously reviewed, with the most recent revision in December 2023. 6.5 HMRC manages the quality of software through its production approvals process which is outlined in these guides. This includes a section on “Minimum Functionality Standards” which sets out the minimum required functionality expected of MTD products. HMRC is currently reviewing these standards, with the aim of ensuring they support innovation in the software market and incentivise the development of the best possible software products. 6.6 HMRC works closely with stakeholders to balance the burden on software developers entering the market, the benefits of innovation, and the quality of the MTD customer journeys. 6.7 For example, HMRC has adapted its approach in response to feedback, enabling software developers to build MTD products iteratively and to be granted production approval for specific elements of the required functionality. From a taxpayer perspective, however, an MTD for ITSA product will only be listed on the HMRC Software Choices webpage once it satisfies all the requirements listed under the ‘Minimum Functionality Standards’.