Making Tax Digital concerns raised by tax professionals

Tax professionals are calling for a review on Making Tax Digital (MTD) following reports that the scheme is to cost around five times more than expected.

The National Audit Office (NAO) report found that this figure excluded upfront costs of 1.5 billion to VAT and self-assessment customers from its business cases.

MTD has been deemed as being ‘out of control’ by the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT), both of which contributed to the report.

They believe that HMRC has vastly underestimated development and implementation costs and overestimated benefits to the exchequer of its flagship scheme.

Alison Kerrey, Chair of the joint CIOT and ATT Digitalisation and Agent Service Committee, said, “HMRC and the government’s execution of this major change to the tax system feels like it is out of control, with spiralling costs, unrealistic timescales, and questionable benefits. While we support digitalisation, the report backs up our concerns that HMRC’s estimates have vastly underestimated costs to taxpayers and overestimated benefits to the exchequer – it is time to pause and take stock

“To announce a project as substantial as MTD, with significant impacts for businesses, agents, software companies and HMRC themselves, without being able to point to a proper business case beforehand, simply beggars belief.

“And then, just three months ago, to omit such massive sums from the cost-benefit analysis, is equally remarkable. You wonder how HMRC would react, and the behaviour they would infer, if a taxpayer had made a similar omission from their returns.”

Alison added, “We have repeatedly questioned whether the business case for MTD stacks up and fully agree with the NAO that a fresh, complete business case needs preparing. Even the latest estimate of a 2:1 return on investment still seems marginal, based on experiences to date with spiralling costs, speculative revenue benefits, and the need to operate two systems for the foreseeable future.

“The haste with which MTD is being pushed forward, without sufficient preparation or testing, and with questionable business justification, has itself caused errors totalling more than MTD is expected to generate by 2033-34.

“It has also led to significant practical concerns amongst practitioners, such as how multiple agents can operate within the system. As well as a cost-benefit analysis, a full review of the fundamental principles behind MTD, is now needed.

“Transferring VAT records onto HMRC’s new systems created, in one year, errors totalling more than MTD is expected to generate by 2033-34. Errors are precisely what MTD is seeking to minimise, not introduce, and this further underlines the need for thorough testing before any additional MTD requirements are introduced.”

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