Tax professionals label MTD ‘fundamentally flawed’by
Agents remain highly sceptical about the benefits of Making Tax Digital and HMRC’s ability to deliver the project, according to recent research from the CIOT and ATT.
A poll of more than 500 tax professionals found that 95% of those surveyed were not confident about HMRC’s ability to oversee the introduction of Making Tax Digital for income tax self assessment (MTD ITSA). Agents questioned the timing, purpose and benefits of the £1bn project when the tax authority’s day-to-day service standards continued to slide.
Conducted in June and July this year, the research from the Chartered Institute of Taxation (CIOT) and the Association of Tax Technicians (ATT) highlighted the impact MTD has had on the relationship between HMRC and tax agents. Of those responding, 79% indicated the project had adversely affected their trust in the tax system, with 56% stating this impact has been “significant”.
The survey comes hot on the heels of reports on the project from the National Audit Office (NAO) and Public Accounts Committee (PAC), which flagged a £1bn budget overspend and highlighted multiple issues still dogging the digital tax transformation programme.
April 2026 date still ‘unrealistic’
In December last year, the Treasury announced a fifth delay to the income tax self assessment stream of the MTD programme. Those with incomes above £50,000 are currently slated to join in 2026, while those in the £30,000 to £50,000 bracket will join in 2027.
While almost a quarter of the CIOT/ATT survey respondents (24%) welcomed the deadline shift as “much more manageable”, the majority (70%) stated that April 2026 was still an “unrealistic” date.
“Despite the start date being postponed for two years to April 2026 and the introduction being phased based on income levels, tax agents are still very concerned about the impact the MTD ITSA proposals will have on them and their clients,” commented Alison Kerrey, chair of the CIOT and ATT’s digitalisation and agent services committee. “There is a real lack of confidence that a convenient, user-friendly and effective system will be ready to go by April 2026.”
The Treasury is currently reviewing whether MTD quarterly reporting is appropriate for people with income between £10,000 and £30,000 – 86% of survey respondents opposed extending MTD ITSA to taxpayers with incomes under £30,000.
Responding to the new research, a spokesperson from HMRC told AccountingWEB: "Making Tax Digital will make it easier and quicker for small businesses to get their tax affairs right first time, supporting their productivity and growth.
“MTD is a step-change which requires taxpayers and agents to change their behaviours," they continued. "We are fully committed to supporting them all through this change and bringing these important benefits to customers from April 2026.”
VAT efficiencies fail to materialise
When pressed on the effectiveness of the project, HMRC officials have often fallen back on the defence that while MTD’s income tax stream has failed to launch, MTD for VAT is now fully operational with 3.2m taxpayer records moved onto its updated IT platform by March 2023.
Back in June, an HMRC spokesperson told AccountingWEB: “MTD has already made it easier for businesses to get their VAT right by helping them reduce errors and freeing up time to help them to grow.” Initial (and unpublished) research from HMRC revealed as part of the recent investigation by the National Audit Office (NAO) into the project also indicated that since its introduction, MTD for VAT had contributed to generating additional tax revenues of between £185m to £195m.
However, tax professionals surveyed reported seeing no improvement in the accuracy of returns or increased productivity, since the introduction of MTD for VAT. Just 15% of respondents noted an increase in productivity for their practice and only 10% saw an increase in client productivity.
In terms of the accuracy of VAT returns, 81% said this stayed about the same and 7% indicated this had actually decreased. At the same time, tax professionals reported they felt the cost of VAT compliance had increased under MTD, with 29% reporting significant increases for clients, and 23% reporting significant increases for their practice.
Freeform comments from the survey also highlighted the minimal impact of the project, and several flagged that the challenges of MTD ITSA are likely to be far more pronounced.
“VAT is already a quarterly (or monthly) reporting tax with few accounting adjustments required assuming the client’s bookkeeping is up to standard,” stated one respondent. “MTD ITSA however is a different matter with a multitude of potential adjustments required for computing the trading income for tax purposes.”
HMRC ‘squaring an impossible circle’
Many tax professionals took the survey’s freeform comment section as an opportunity to express concern about the basic principles of MTD, its perceived benefits and costs, and the approach taken.
One comment suggested that while the project might make sense on a conceptual level, the current version was “fundamentally flawed”.
“What is required is a revisit to the drawing board and then starting over from first principles again, not endless deferrals while HMRC attempts the Sisyphean task of squaring an impossible circle,” continued the comment.
Another questioned the tax authority’s motivation for the project’s introduction: “Everyone needs to be able to see the benefit of MTD, not just HMRC. HMRC should fully sort out their own current basic admin and staffing issues before implementing something as seismic as this.”
Another consistent message from the UK’s tax professionals throughout the responses was that MTD should not be given priority over the need to improve HMRC’s current service levels.
“HMRC [has] bigger problems with levels of staff and taxpayer satisfaction that need addressing before implementing these changes,” read one comment. Another added that HMRC “should divert funds into trying to improve general service levels and phone lines and not pursue MTD further until this has been done.”
“The profession is keen to embrace digitalisation where this delivers benefits for their clients and their firms, as evidenced by the significant levels of online filing of self assessment returns,” continued CIOT/ATT committee chair Kerrey. “However, HMRC must do more to retain the faith and confidence of the large numbers of UK taxpayers affected by this change, and their agents.”
9 Aug 2023: This article was amended to add a comment from HMRC