The Chartered Institute of Taxation (CIOT) welcomes the announcement today that the government will publish an evaluation of the introduction of Making Tax Digital (MTD) for VAT along with related research, with the implication that this will be done before rolling out MTD to other taxes.
The results of a recent survey of businesses and their advisers by CIOT and the Association of Taxation Technicians led the Institute in January to call for a comprehensive review of MTD for VAT before HMRC takes the decision to go ahead with plans to roll out digital reporting obligations more widely.
The survey showed that:
- Nearly 90 per cent of respondents said that MTD for VAT has not reduced errors
- The costs of MTD compliance had far exceeded government estimates
- Just 14 per cent of respondents said there had been an increase in productivity in their organisation as a result of MTD for VAT
Richard Wild, Head of the CIOT Technical Team, commented:
“This is a sensible decision by the government. Our view, which is supported by the results of our survey, is that the MTD project is far from achieving its goals and has proven more difficult to implement than the Government expected.
“Whilst compliance rates have been high, this has come with significant costs for business and their agents, and there are still a large number of taxpayers who have yet to become compliant with MTD for VAT.
“A much greater number of taxpayers will be affected by MTD for Income Tax compared to the number affected by MTD for VAT. Many of them will be less digitally capable than VAT registered businesses and will find it more difficult to cope, so it is vital that MTD for VAT is working smoothly before it is rolled out any further.”
Victoria Todd, Head of the CIOT’s Low Incomes Tax Reform Group (LITRG), added:
“LITRG welcomes this announcement of an evaluation. There are still significant numbers of taxpayers who are yet to take action, either to sign up or to claim exemption, many of whom will be unrepresented. HMRC need to do much more to support these groups. MTD for VAT must be working for everyone before moving on to income tax measures.”