Results of a survey conducted by the CIOT and ATT about Making Tax Digital (MTD) strengthens the tax bodies’ shared view that the MTD project is far from achieving its goals. The survey results have led the two organisations to call jointly for a comprehensive review of the roll out of MTD for VAT before HMRC goes ahead with plans to roll out digital reporting obligations more widely.
The Government promotes MTD as part of its plans to ‘make it easier for individuals and businesses to get their tax right and keep on top of their affairs’, while also claiming MTD will reduce the tax gap by minimising avoidable errors.1 But the results of a detailed joint CIOT and ATT survey held during December 2019 and January 2020 pose a challenge to any complacency over the extent to which these benefits are being realised.
The online survey was open to businesses and agents with an interest in MTD. The questions explored opinions about the implementation of MTD for VAT and the future of the whole MTD programme. There were a total of 1,091 responses to the survey. The survey found that the costs of complying with MTD for VAT have so far been significantly above HMRC estimates, and that generally it is not reducing mistakes.
Tina Riches, Chair of the joint CIOT and ATT Digitalisation and Agent Services Committee, said:
“These initial results underline our concerns that, far from bringing benefits to businesses and the Exchequer, MTD for VAT has so far created additional, costly obligations for most businesses beyond what was predicted by HMRC. The results suggest there is a very long way to go to achieve the benefits claimed by the Government about MTD for VAT. The Government should undertake a detailed review of MTD for VAT, and determine any benefits, before rolling out MTD more widely.
“Appropriate software can, when used properly and in accordance with a business’s needs, deliver significant benefits. But our survey demonstrates that MTD is not currently delivering those benefits to businesses, nor likely to reduce the tax gap. A thorough review and further consultation is needed before extending its scope.”
Tina Riches said:
“The commitment of agents to help their clients comply with the new rules is commendable, and we are pleased to see that this has already been recognised by HMRC.3 But this level of costs borne by agents is both unacceptable and unsustainable. A truncated pilot, issues with the Agent Services Account, and dealing with large numbers of teething problems are key contributors to this, as well as limits to the support that clients are willing and able to pay for.”
Tina Riches said:
“It is no surprise that mandating MTD for income tax next is the least favoured option. As we anticipated, the roll out of MTD for VAT has proven more difficult than the Government expected. MTD for income tax would encompass a significantly greater number of taxpayers, many of whom will be less digitally capable than VAT registered businesses, and would be much more complex. Taxpayers will require significant training and ongoing support, and we are concerned that their agents, the tax charities and HMRC, simply will not be able to cope.”