VAT nudge collects more tax
An HMRC experiment, which incorporated a nudge message into the VAT return process, has apparently resulted in £330m of additional VAT paid by traders.
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If we don't know the size of the sample, the results are already hard to gauge. Sample size is a key factor in any study.
We also don't know how it was "randomised", so no way of knowing if that affected the results. This also raises the question of how they know an additional amount was reported. That would only be comparable if the two groups were of similar make-up. (i.e. both groups would be expected to report the same amount otherwise). If the two groups were truly random, how did they adjust for differences between them?
But the thing that really confuses me about this is that they are reporting after running for a single year. Seasonal variances anyone?
There have been at least 2 different messages shown, and they seemed to appear occasionally at first, and then quite widely.
As above, I question very hard how they have determined any genuine tax rise as a result of this prompt.
Their "normal" way of measuring error is already deeply flawed. It turns out all they do is following a VAT inspection extrapolate away, ignoring (a) the fact many errors would have been picked up at year end and (b) errors in HMRC's favour. Its from such deeply flawed data the mythical "tax gap" is created.
My understanding is that the sample size was half of the VAT population and that the additional declaration will now be presented to the other half of the population. As Rebecca points out, many of these traders will have moved to MTD in the meantime and so won't be presented with the declaration until such time as they are extended to commercial software.
Sampling flawed, methodology flawed, taxpayers moving from GG to MTD means results skewed. So the results prove nothing whatsoever and there is no proper control group or comparison so proves nothing.
If this is hmrc’s method used to calculate the tax gap, no wonder it’s greatly exaggerated.
How about simplifying the VAT system, rates, RC, DRC and all VAT on building/construction works? Et voila, therein lies your problem! Ok some of it is fraud, but the greater amount is complexity, surely?
Still worry about the "honesty" statement. Too tempting for HMRC not to use it when oppertunity arises.
Then can one trust the HMRC of today?
The claim of increased tax raised is nonsense and not statistically valid. How can the Government allow this? The ONS must be furious that other departments are allowed to devalue the veracity of Government statistics.
I have seen these messages on numerous client VAT returns but all the checking is done prior to accessing the form. This is what we do as agents and why our clients employ us- check the figures are correct. A silly tick box is no substitute for years of professional training and experience.
An under-resourced HMRC should concentrate on answering the phone not futile PR exercises.
Perhaps a similar "honesty" box should be included before Boris says anything. "Are you sure Boris... really really". But yes this is just more psychological babble from HMRC. How do they know the increase in VAT was due to nudging... or Brexit stockpiling... or more sales of ice cream over a hot summer.