More than 80% of accountants surveyed by Thomson Reuters estimate the cost of Making Tax Digital (MTD) to individual small business clients will be more than £200.
The survey of 500 accountants revealed nearly half (46%) put the figure at somewhere between £200 and £500. 27% thought it would be between £500 and £1,000, while 9% estimated the cost at more than £1,000.
The cost of MTD has been estimated by various accounting and small business bodies, ranging from HMRC’s own figure of £280 up to nearly £3,000 per business.
In giving evidence to the Treasury Select Committee in October about the potential costs and savings expected to be generated by MTD Mike Cherry, policy director of the Federation of Small Businesses, suggested that MTD would cost businesses £2,770.
Andrew Tyrie MP, chairman of the select committee, has since called on the Treasury and FSB for clarity on the costs of MTD.
He said: “The compliance cost estimates are so far apart that at least one of them must be wrong. I have written to both the Treasury and the Federation of Small Businesses to ask for detailed supporting methodology for their estimates.
“If the FSB are right, the effects of Making Tax Digital would be crippling for many small businesses. If the government are right, businesses have something to gain in the longer term and one would expect them to be queuing up to join the pilot,” Tyrie added.
Seeking the truth
AccountingWEB tax contributor Wendy Bradley has also been seeking out the truth behind the figures quoted by HMRC around MTD costs and savings, including a Freedom of Information request for details of the computation and underlying data.
Tax campaigner and City University professor Richard Murphy has also focused on the questionable cost and benefit MTD calculations at a recent Lords committee.
According to Murphy’s analysis, when software costs are stripped out of HMRC’s £170m estimate of the extra cost to business of MTD, £103m is left to cover the cost of quarterly updates from 5.9m businesses - equivalent to £4.36 per update.
Using the national minimum wage as a benchmark, Murphy suggested HMRC was allowing 35 minutes to complete each update. “That is not plausible,” he told the committee. Based on his estimate that the tasks involved in filing each update would take around half a day, he estimated the cost to business of MTD would be £1.8bn.
In his evidence report Murphy also estimated that MTD compliance will cost at least £300 a year for unincorporated business and £600 for companies.
When it comes to the huge variation of cost estimates, one explanation is the lack of information and detail available on exactly what MTD entails.
Asked about the most pressing information being held back by HMRC, two-thirds (65%) of accountants surveyed by Thomson Reuters wanted to find out which of their clients will be exempt from MTD.
Mark Purdue, tax product manager at Thomson Reuters, said: “Our findings show that accountants are looking to HMRC to confirm the turnover exemption so that it is clear as to which businesses will be exempt from MTD, or deferred until 2019. In turn, this will allow accountants to plan for how they can advise their clients under the new MTD rules.”
The MTD exemption threshold is expected to be revealed at or after the Spring Budget next month.
Other pressing information accountants wanted detail on included 23% wanting to know taxable profit workings, and 10% about the availability of free software. 87% of accountants said they feel they needed more information on MTD.
The survey also threw up some other startling stats such as 51% of accountants still haven't spoken to clients about MTD, while three-quarters (73%) have called for a delay to the programme with just 11% of accountants feeling able to handle MTD themselves.
What do you think the cost of MTD will be to your individual clients?
About Robert Lovell
Business and finance journalist