Save content
Have you found this content useful? Use the button above to save it to your profile.
A cartoon man looks at a long roll of tax rules
istock_erhui1979_AW_makingtaxdifficult

MPs warn that MTD has lost sight of taxpayer benefits

by

Hot on the heels of Making Tax Digital changes announced at the Autumn Statement, a committee of MPs has highlighted concerns about the costs, delays and deliverability of the programme, stating HMRC has lost sight of needing to put taxpayers at the heart of changes to the tax system and risks 'making tax difficult'.

24th Nov 2023
Save content
Have you found this content useful? Use the button above to save it to your profile.

After a relatively long layoff, it’s been like London buses for the nation’s Making Tax Digital watchers. 

Firstly, as part of the fringe act to Wednesday’s Autumn Statement jamboree, the government announced a series of revisions, easements and promises for its Making Tax Digital for income tax self assessment regime, with the headline item being that it won’t be extended to those earning under £30,000 for the foreseeable future.

And yesterday the Public Accounts Committee (PAC), a cross-party group of MPs responsible for examining the value for money of government projects, released a report on the flagship digital tax transformation project which highlighted that HMRC's failures in planning, design and delivery of Making Tax Digital had lead to costs and delays.

Commenting on the report, committee chair Dame Meg Hillier said: “When reporting on proposals for digitalising the tax system, our committee should not have to be recommending that HMRC start with what taxpayers need … But seven years and £640m into the Making Tax Digital programme, we are concerned HMRC is also succeeding in making tax difficult.”

Taxpayers asked to spend more and do more to comply

In its Progress with Making Tax Digital report, the PAC flagged concerns about the additional burdens and costs that MTD will impose on taxpayers, despite its initial aim to reduce them. 

“HMRC has lost sight of its original aim to reduce the burden on taxpayers and is increasing the burdens it imposes by asking self assessment taxpayers to pay for third-party software and file tax returns quarterly,” stated the report.

“While Making Tax Digital will substantially benefit HMRC by improving its systems, taxpayers will be asked to spend more and do more to comply.”

The report accused HMRC of not being “open enough” about the additional software and training costs MTD will impose on many taxpayers. While research conducted by the Revenue found that the average upfront costs for taxpayers of complying with MTD would be £330 upfront, with some facing costs close to £1,000, the PAC stated that HMRC had excluded transitional costs totalling more than £2bn from two business cases seeking further investment for the programme.

“Imposing significant additional burdens on customers in the middle of a cost of living crisis could not be less welcome,” Hillier commented.

“HMRC’s exclusion of billions of pounds of projected costs when seeking investment for the programme is utterly extraordinary, and future transparency on costs and benefits must be non-negotiable.”

‘Widespread and repeated failures’

The report also highlighted “widespread and repeated failures” in HMRC’s planning, design and delivery of MTD.

“It is unacceptable that seven years in, with £640m of taxpayer’s money spent on the programme as a whole, so many questions remain about how [MTD ITSA] will work,” stated the report.

While some points raised have been addressed by the Autumn Statement MTD announcement, which committed to building solutions for multiple agents and announced easements for joint landlords, as former tax partner, ICAEW past president and ABAB board member Paul Aplin recently pointed out, there is “still a long way to go and a lot to deliver.”

The report also highlighted that despite HMRC’s aim to pilot the programme with 15,500 people, by 2023 it had just 137 participants. 

“The self assessment part of the programme was always going to be a more complicated task than for VAT,” stated the report. “Despite this, HMRC announced a fast timetable without anticipating the additional complexity and its subsequent work to design and test the system has been far too limited.”

It added that HMRC’s poor track record of repeated delays to the programme and a “lack of conviction” in its latest timetable gives MPs “little confidence” that it will deliver the rest of the programme on time.

HMRC has currently set itself a target of April 2025 to be ready for a near-unrestricted voluntary pilot of 1.6 million self assessment taxpayers with incomes over £30,000, leaving it less than two years to be ready. 

With “major uncertainty” remaining over its design choices, the report flagged that HMRC will have little time to work through and test technical solutions to issues such as how data security will be achieved for taxpayers with multiple agents or how a free service will work for those with the simplest affairs.

HMRC told the PAC it expects that introducing MTD for VAT and self assessment will now cost a total of £1.3bn, compared to its original estimate of £222m in 2016 for all three taxes in the programme (with no word on when MTD for corporation tax will be delivered, or how much this will cost).

Responding to the report, an HMRC spokesperson told AccountingWEB: “The additional tax revenue expected from MTD has increased to £3.9bn, offsetting any additional costs. MTD continues to provide a high return on investment in delivering this complex programme, building on the successful digitalisation of VAT.”

‘We need a realistic plan and a timetable’

Speaking to AccountingWEB from Westminster, Hillier said HMRC had misjudged the scale and complexity of the project – as tax authority chief Jim Harra admitted to the PAC in an evidence hearing back in June.

“HMRC has been over-optimistic about the project from the beginning, and that’s seen the cost of it soar 400% from the initial forecast,” said Hillier. “This happens too regularly in government – when a Whitehall plan hits reality in terms of the granular issues businesses face.

“We need to have a realistic plan and a timetable, which HMRC hasn’t had so far,” she continued. “They haven’t tested it well and it’s been delayed multiple times. Most people just want certainty, honesty and transparency from their tax system, but it feels like many have lost confidence.

“I’ve seen it before with other projects. If you lose the confidence of intermediaries, it’s really hard to win it back

However, Hillier added it would be a “bold step” to mothball the programme now.

“We’ll be watching this closely. It has a relentless momentum and would be hard to stop now, but not impossible – look at HS2. We haven’t analysed how much it would cost to stop it, but it would have to be a fast decision at the start of the next Parliament. 

“If done well it could still have benefits,” she said. “The wins are still worth going for, even if the delays have dented stakeholder confidence. As HMRC has stated, the data it could bring in could be a real aid in setting future policy, but they just need to bear what the taxpayer thinks in mind."

Replies (56)

Please login or register to join the discussion.

avatar
By Open all hours
24th Nov 2023 08:46

I think the headline that you binned was more accurate.
‘HMRC treats customers with contempt’

Thanks (9)
Replying to Open all hours:
avatar
By FactChecker
25th Nov 2023 20:14

Quite, would someone please explain to Meg Hillier that 'lack of testing' (whilst a heinous crime) is NOT the most serious issue ...
... which is the lack of a full, agreed Specification (against which testing would serve to identify errors and minor refinements - not just 'ooh we hadn't thought of that')!

Thanks (14)
Replying to FactChecker:
avatar
By NotAnAccountant2
26th Nov 2023 10:59

FactChecker wrote:

Quite, would someone please explain to Meg Hillier that 'lack of testing' (whilst a heinous crime) is NOT the most serious issue ...
... which is the lack of a full, agreed Specification (against which testing would serve to identify errors and minor refinements - not just 'ooh we hadn't thought of that')!

And that "lack of a full specification" is what allows costs to escalate.

An agile development methodology can have some significant positives - in particular, it's much better at finding that your specification is insufficient or just plain wrong earlier in the development process. But it's not a panacea.

When you're building a building, you don't have to decide precisely where every desk goes on each floor before you start construction but you cannot add floors or change the footprint once you've started building it.

Thanks (3)
Replying to NotAnAccountant2:
avatar
By FactChecker
26th Nov 2023 13:25

Good analogy.

Their over-reliance on agile development (to the apparent exclusion of *any* plans with metrics) can only mean they no longer have anyone in-house who understands the different shades of specification ('user requirements' vs 'development' and so on).
Whilst it's hardly going to be mentioned by the external contractors (for whom it'd be like turkeys voting for more Christmases per annum)!

Thanks (1)
Replying to FactChecker:
avatar
By DMBAcc
27th Nov 2023 11:26

Hi FactChecker I have been wondering for a fair while now the same thing. Have all the best people left HMRC and we are now left with a rump of people who may understand how to use a computer but have precious little knowlegde of the many and varied individual tax systems that now make up the whole?

Thanks (2)
Replying to DMBAcc:
avatar
By FactChecker
27th Nov 2023 11:53

You might very well think that; I couldn't possibly comment!

Thanks (4)
Replying to DMBAcc:
avatar
By djtax
27th Nov 2023 11:57

Yes all the best,experienced people have indeed left HMRC - it is now some years since we could deal with knowledgeable 'HM Inspectors of Taxes' - a job description in HMRC that has disappeared. Even the ADL seems no longer to have properly experienced staff able to answer our queries. The HMRC top executive board itself is almost entirely made up of career civil servants with very little or no tax background.

Thanks (10)
Tornado
By Tornado
24th Nov 2023 09:28

I am sure it is obvious to all that MTD needs to be scrapped as soon as possible instead of having thousand of millions more of our hard earned pounds thrown at it for no good reason, especially when many people are desperately trying just to survive, and have no appetite or time for jumping through unnecessary HMRC hoops related to a Vanity Project.

HMRC keep coming up with ever increasingly whacky ideas to save this project effectively trying to destroy the excellent systems that we already have related to tax calculation and collection and the uniform presentation of Accounts and Financial information that we already use on a regular basis.

This is looking more like a total destruction of our traditional values and standards and leads me to seriously wonder if the decision makers at HMRC really are living in the same world as we are, or perhaps, playing away with the Fairies.

It will make no difference as to how many hard wishes they make or group hugs they have, MTD is a monster that has to be slain, and as soon as possible. Quarterly Reporting and other fantasy ideas simply will not happen.

The MTD project died a long time ago and needs to be buried as soon as possible so that we can carry on with and develop the excellent Self Assessment system which has been tried and tested for decades and has been specifically designed for the job of Tax Administration.

Thanks (40)
avatar
By AdamJones82
24th Nov 2023 10:14

Just think what that £640 million could have done improving the current system we have instead of this white elephant which will never happen

Thanks (26)
Replying to AdamJones82:
avatar
By DMBAcc
27th Nov 2023 11:29

Better still used to fill the millions of pot holes in the country. We are looking more like a third world country every day and I am beginning to think that our tax system is going the same way. DIGITAL my ar$e !!!!

Thanks (3)
Replying to DMBAcc:
avatar
By Latinaid
27th Nov 2023 12:11

DMBAcc wrote:

Better still used to fill the millions of pot holes in the country. We are looking more like a third world country every day and I am beginning to think that our tax system is going the same way. DIGITAL my ar$e !!!!

Ah, but Sunak is going to use the savings from cancelling HS2 to fix the potholes (at least, whatever is left after siphoning off as much as possible to friends and family).

Thanks (6)
Replying to Latinaid:
avatar
By carnmores
27th Nov 2023 12:43

nonsense , i cant see any siphoning off its ridiculous so say so , the malaise is international not national certainly in europe . UK has just overtaken France in terms of manufacturing output. One of the main reasons is lack of investment capital and labour not working. apart from most s/e clients people only work 3 to 4 days a week so things do not get done. 2 councils side by side in london Westminster & Kensington Chelsea can be easily compared the former is much much better and quicker at clearing things up KC getting increasingly hopeless and conventrating on the wrong things thats not wokeness but sheer stupidity

Thanks (2)
avatar
By AdamJones82
24th Nov 2023 10:47

It lost sight of benefits because there weren't any to see in the first place. Unless you are a software vendor

Thanks (27)
avatar
By Tom+Cross
24th Nov 2023 11:18

It's very much another "HS2" white elephant. and please, oh please, let's not blame the Coronavirus for any more of these ill-conceived projects.
Sir Harra could and should have shown true leadership if MTD was ever to succeed. Instead and akin to everything else he's touched, during his tenure, it would be an abysmal failure. The tragedy is that many, many good and experienced accountants and tax advisers have walked away, from our profession, simply to move away from this magic mushroom of a concept.
Civil servants seem incapable of making a success of anything that requires competence.
And to cap it all, there was Mel Stride strutting his DWP stuff on Sky etc, this morning.
Remember Mel; https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-minister-talks-vat-a...

Thanks (14)
avatar
By carnmores
24th Nov 2023 14:29

MVD - I still don't understand why linking totals on spreadsheets is of any use to anyone

Thanks (8)
Replying to carnmores:
avatar
By NotAnAccountant2
24th Nov 2023 15:23

carnmores wrote:

MVD - I still don't understand why linking totals on spreadsheets is of any use to anyone

That one is easy. I was talking to a bookkeeper about MTD and she said that the only difference is now her clients have to pay a third party in order to submit the data that previously could be submitted for free.

So it's clearly of use to the third party who does the bridging stuff.

Thanks (14)
Replying to NotAnAccountant2:
avatar
By carnmores
24th Nov 2023 15:29

boom boom

Thanks (1)
By ireallyshouldknowthisbut
24th Nov 2023 15:58

Hopefully the new government will put a line through it and we can all move on with our lives.

Thanks (13)
avatar
By GHarr497688
24th Nov 2023 22:14

HMRC say all these benefits MTD will bring they should have got it in sooner. The fact it's not been introduced say's it all. Utter chaos will result in this programme encouraged I would think by the likes of SAGE and IRIS when then slipped under the duvet with HMRC in 2015. Now the fried egg yokes are starting to mark the Egyptian cotton covers.

Thanks (0)
RLI
By lionofludesch
25th Nov 2023 16:29

Any boon to the taxpayer was nullified by mandation.

Taxpayers should have been allowed to sign up when they were good and ready. If that meant that they never joined, the conclusion I would have drawn is that the system was obviously not good enough.

Thanks (10)
avatar
By FactChecker
25th Nov 2023 20:24

Even the overspend (to-date and forecast) against budget is portrayed misleadingly .. because HMRC don't exactly draw attention to how much *less* they're due to deliver than previously promised. It's not just the lack of a plan for CT within the original MTD 'vision', but the omission of LLPs from ITSA (as well as the bulk, by volume, of the SA traders with the reduced entry bar).

So ... 'pay more AND get less' - the true motto of Harra's glorious reign!

Thanks (14)
avatar
By martinengland
26th Nov 2023 16:04

The overriding innuendo of the MTD story and this Parliamentary pseudo-report is that MTD is a "genuine error" rather than a conspiracy.

I disagreee. The design philosophy, the implementation parameters, the usage methods and the measureable outcomes all point towards the negative "unforeseen consequences" against small businesses and wealthier individual taxpayers being the most plausibly-deniable ulterior motives of the MTD policy. The cost of implementing the pseudo-change of MTD was the damage sought in the cost of (such a meaningless) transition, not the outcome of making tax collection more efficient (akin to a lawfare claim financially damaging the respondent via the cost of defence, rather than any serious attempt to have the claim go to a court).

The prior tax collection system wasn't broke, it didn't need fixing, but it did too little to sabotage ordinary people's lives. Tut, tut, tut. That will never do. We can achieve more damage, right?

Of the sentences from the pseudo-report quoted in this article, I should expect HMRC to interpret them as a validation of a job well done. More people frustrated than expected, more public money wasted than initially expected, more damage done to public confidence in the public sector generally than expected... these are the key political performance indicators, right?

The whole MTD saga has more than just a whiff of Common Purpose about it.

Thanks (4)
RLI
By lionofludesch
26th Nov 2023 16:24

In a desperate attempt to salvage MTD, HMRC have had to ditch accountancy principles which have lasted some 600 years.

Has any other country done this?

Thanks (20)
avatar
By petestar1969
27th Nov 2023 09:24

So, finally the MP's have started calling MTD what all of us have been calling it for years........

Thanks (7)
Replying to petestar1969:
avatar
By DMBAcc
27th Nov 2023 11:35

My MP has never been interested but I expect him to jump on the band wagon as the next general election approaches. The cockroaches will appear as they always do. Nothing is now done for the public good. It seems now that unless an individual MP personally benefits he/she will not be interested in what their voters say.

Thanks (9)
Replying to DMBAcc:
Tornado
By Tornado
27th Nov 2023 17:37

Votes come from people and not Corporations. We are often told that small businesses employ more people than the large Corporations, and are key to the success of this Nation.

Perhaps there will be a realisation soon that every potential MP in the next election will need to be nice to us if they want to get back into power, and listen to what we say as my vote is going to go the party that finally and irreversibly scraps MTD before the election. After all, the Government is Working for US and needs to remember this.

Thanks (3)
Replying to Tornado:
RLI
By lionofludesch
27th Nov 2023 17:50

Tornado wrote:

Perhaps there will be a realisation soon that every potential MP in the next election will need to be nice to us if they want to get back into power...

I think they're resigned to not winning however nice they are.

Thanks (0)
avatar
By Self-Employed and Happy
27th Nov 2023 09:25

Why are they even bothering to chuck good money after bad, ah yes....it isn't their money and they need to justify their existence.

No need at all for MTD for ITSA.

Thanks (14)
avatar
By johnthegood
27th Nov 2023 09:31

Almost everyone is now agreed, it ain't going to work, even the pro MTD commentators on here have disappeared, and yet HMRC say "MTD continues to provide a high return on investment in delivering this complex programme"

Well, no Jim, I think you got yourself a bit muddled there - how exactly can there be a return on investment when its not even been implemented yet, theres a technical term for your suggestion - pie in the sky

Thanks (17)
Replying to johnthegood:
avatar
By johnjenkins
28th Nov 2023 08:33

He must be talking about all the vat that has been saved by going digital, but then wasn't 99.9% of vat already digitised in some way shape or form prior to MTD.

Thanks (0)
Replying to johnjenkins:
RLI
By lionofludesch
28th Nov 2023 08:54

What saved VAT would that be?

Thanks (0)
Replying to lionofludesch:
avatar
By johnjenkins
28th Nov 2023 09:43

Exactly.

Thanks (0)
avatar
By Yossarian
27th Nov 2023 09:45

Why not just let taxpayers pay Self Assessment on a monthly direct debit, interest-free, and forget all of this MTD nonsense? That would probably raise more in tax revenue overall, cut collection costs and defaults, actually work, actually benefit taxpayers, and not cost 640 million sodding pounds!

Thanks (12)
Replying to Yossarian:
avatar
By Rgab1947
27th Nov 2023 10:08

Horrors. Give HMRC access to a bank account. They can just raid it on some pretext whenever Gov is short of cash.

No thanks. Will never give any tax authority, especially HMRC, access to my bank account.

Thanks (8)
Replying to Rgab1947:
avatar
By Yossarian
27th Nov 2023 11:11

Rgab1947 wrote:

Horrors. Give HMRC access to a bank account. They can just raid it on some pretext whenever Gov is short of cash.

No thanks. Will never give any tax authority, especially HMRC, access to my bank account.

Direct Debit Guarantee. If they take the wrong amount just get your bank to refund it. I have done so in the past and it works.

Thanks (4)
Replying to Yossarian:
Morph
By kevinringer
27th Nov 2023 13:19

Agreed. All my VAT clients have been paying HMRC by DD for 20+ years and there has never been a problem. I've started switching my PAYE clients to DD and they seem to be working ok too. Taking more frequent payments for SA will help some client spread the cost. If this is what is needed to scrap MTD, then I'm all for it.

Thanks (2)
Replying to kevinringer:
avatar
By Yossarian
28th Nov 2023 09:55

kevinringer wrote:

Agreed. All my VAT clients have been paying HMRC by DD for 20+ years and there has never been a problem. I've started switching my PAYE clients to DD and they seem to be working ok too. Taking more frequent payments for SA will help some client spread the cost. If this is what is needed to scrap MTD, then I'm all for it.

Mine too. In fact the only problems I've had with HMRC payments tend to be where the client has paid it manually and used the wrong reference.

Thanks (1)
Replying to Yossarian:
avatar
By petestar1969
27th Nov 2023 13:52

Monthly?

Sounds a bit like PAYE which, of course, is what the government and HMRC want everybody to be on.

Thanks (0)
Replying to petestar1969:
avatar
By Yossarian
28th Nov 2023 09:50

petestar1969 wrote:

Monthly?

Sounds a bit like PAYE which, of course, is what the government and HMRC want everybody to be on.

Does it matter what it sounds like if it works? I already have some clients paying their SA monthly by DD. The only differences are that currently they have to get permission and they are charged interest.

Thanks (0)
avatar
By wblewis
27th Nov 2023 10:03

Let's be honest HMRC is not fit for purpose as an organisation. MTD is just latest system design and implementation disaster that they have been responsible for. Drastic action is needed as they trying to cover up their incompetence.

Thanks (12)
avatar
By johnjenkins
27th Nov 2023 10:03

It's all been said but I had to laugh when I read "MP's warn about MTD". Doesn't take them long to cotton on does it?

Thanks (4)
avatar
By Red1960
27th Nov 2023 10:49

However, Hillier added it would be a “bold step” to mothball the programme now.

Clueless.

Thanks (2)
avatar
By Nick Freeman
27th Nov 2023 10:54

"Responding to the report, an HMRC spokesperson told AccountingWEB: “The additional tax revenue expected from MTD has increased to £3.9bn, offsetting any additional costs".

It appears that the benefits from tax revenues have miraculously increased in line with the additional costs of implementing MTD! Does this remind you of tweaking the sales data of a cash flow forecast so that the client can obtain some bank finance?

Thanks (8)
avatar
By Latinaid
27th Nov 2023 12:16

'HMRC has currently set itself a target of April 2025 to be ready for a near-unrestricted voluntary pilot of 1.6 million self assessment taxpayers with incomes over £30,000, leaving it less than two years to be ready. '

Where are these mythical 1.6m people who will voluntarily participate? Of my 50 or so clients, not a single one would see any benefit in taking part.

Thanks (6)
Replying to Latinaid:
Morph
By kevinringer
27th Nov 2023 13:25

When HMRC announced the first MTD pilot in 2016 starting 2017, HMRC said publicly that they expected 400,000 volunteers by 2018. From what I've heard, they never got more than 100 and by 2022 the number was in single figures. The fact that the actual number of volunteers was a fraction of 1% of what was expected should have rang alarm bells in HMRC and HM Government. But instead they steam-rollered on. 1.6 million is complete pie-in-the-sky. Based on the previous pilot, they'll be lucky to have 100 participating for the whole pilot. HMRC should be compelled to cancel if participation is significantly less than HMRS's goal.

Thanks (5)
avatar
By Mr J Andrews
27th Nov 2023 12:42

Apart from some overdue common sense , two statements in this article sum up the deceit, contempt and naivety we have seen over the past seven years.

~ HMRC has lost sight of its original aim to reduce the burden on taxpayers.......
This was NEVER the Revenue's aim.

~ An { unamed } HMRC spokesperson told Accounting Web the increased tax yield EXPECTED from MTD ....would cover the additional implementation costs of MTD
It was ALWAYS the Revenue's aim to get more money in from this white elephant.

Well done the anonymous HMRC spokesman. No doubt Harra would disagree , pointing out the enormous benefits his ''customers'' would miss out on if this dumb idea was scrapped.

Thanks (7)
Tornado
By Tornado
27th Nov 2023 12:49

Hello to the Department for Whacky Ideas formerly known as His Majesty's Revenue and Customs.

I simply cannot believe the behaviour of this once well respected, if not well loved, department. I am truly shocked by the wilful devastation that they are wreaking on our traditional Tax Administration System and the unbelievable disregard for Accounting Standards and Financial Reporting that have been the metrics for hundreds of years to assess the performance of business activities.

Why all unincorporated businesses should have a Cash Basis as the default format of Accounting is just inexplicable. Make it optional by all means but not the default.

They genuinely do not know what they are doing and I am not joking when I say that there must be something unhealthy influencing their decisions. There is no other explanation.

Thanks (11)
Profile
By indomitable
27th Nov 2023 13:40

Utter contempt for 'taxpayers' is my view of the civil service and the majority of the political class

If those at the top of HMRC and the MP's that are supposed to be overseeing them (which would be the treasury) cannot provide even a basic 'fit for purpose' service, there needs to be different people in charge.

How much longer do taxpayers in this country have to accept the highest tax burden since WWII and yet completely substandard public services which includes HMRC

Thanks (9)
Replying to indomitable:
By ireallyshouldknowthisbut
27th Nov 2023 14:12

indomitable wrote:

How much longer do taxpayers in this country have to accept the highest tax burden since WWII and yet completely substandard public services which includes HMRC

Until we have a competent government properly funding all the "boring stuff" and not cutting corners which then comes back and costs much more in the long term.

Little hope of that.

Thanks (5)
avatar
By steve 12321
27th Nov 2023 14:53

Of course they have lost sight of the benefits of MTD for ITSA - they could not been seen in the first place! They just aren't any. It is just not needed and makes tax compliance much harder and more expensive. Why try to fix something that is not broken. SA Tax is an annual calculation.

Thanks (7)

Pages