It isn’t just businesses up and down the South West of England and beyond – including many that have reached out to TS Partners about our digital accountancy in Plymouth, Wellington, or Newton Abbot – that have been looking to modernise their approaches to tax in recent years.
That’s because, since HM Revenue & Customs (HMRC) announced its Making Tax Digital (MTD) scheme in the mid-2010s, the tax office has been seeking to revamp its own systems for three business taxes – VAT, income tax self-assessment, and corporation tax.
The focus of the initiative has been on digitising records and moving bookkeeping online. However, the digital tax drive has now been the subject of criticism from the National Audit Office (NAO), which has said the programme is more than three years late and has exceeded its original budget by more than £1 billion.
What has the NAO said about the situation with Making Tax Digital?
In its report entitled “Progress with Making Tax Digital”, Parliament’s spending watchdog said that HMRC’s plan for the digital transformation of tax had failed to properly take into account the upfront costs imposed on millions of taxpayers.
The NAO report stated that the tax body had left out significant costs to customers from key business case documents that had sought approval for additional funding.
HMRC had intended to transfer its tax systems and records onto a modern tax management platform by 2020. However, the NAO said that this original deadline for getting the system up and running was “not realistic”, with it now being anticipated that the scheme will cost £1.3 billion, compared to the £226 million officials had budgeted for in 2016.
Although there have now been four delays to Making Tax Digital, the taxman has made a certain amount of progress with the initiative. Some 3.2 million tax records have been moved onto the new HMRC IT systems, but more than 14 million files are still awaiting transferral.
Since 2019, VAT has been processed with the use of tools from Making Tax Digital. Self-assessment, though, has ended up being “far more complex”, and has been subject to continued delays.
The tax office’s efforts to deliver the new system on time have also been hampered by a need to redirect resources to deal with Brexit, as well as staffing constraints during the COVID-19 crisis.
In May last year, HMRC had forecast that taxpayers would face total net ongoing costs of around £900 million over five years in order to achieve MTD compliance.
However, the tax body’s business case for the project had not accounted for the cost of obtaining tax advice, and the expense that customers would incur in updating their own systems.
Was the original aim of putting MTD in place by 2020 “never viable”?
Chairman of Parliament’s Committee of Public Accounts, Meg Hillier, said that it was “never viable” to implement Making Tax Digital for a 2020 deadline, adding: “HMRC wanted to increase tax revenue, but completely underestimated the cost and scale of work required to move from its legacy systems and by business taxpayers to move to digital records.
“Eight years on, many tax professionals remain unconvinced by the proposed approach, which imposes significant costs and burdens on many self-assessment business taxpayers… [HMRC] now needs to demonstrate its plans add up.”
A spokesman for HMRC, however, said it welcomed the watchdog’s “recognition of our progress in digitalising the tax system, and its confirmation that our plans can improve the system’s efficiency and effectiveness.”
The tax office added that MTD would “deliver a strong return on investment for the taxpayer.” It has now targeted 2027 for the implementation of its digital tax regime for self-assessment, although the review body said this still seemed to be a “very challenging plan”.
Reach out to TS Partners to learn more about our own services in digital accounting
As professionals with no shortage of expertise and experience ourselves in digital accountancy in Plymouth, Newton Abbot, and Wellington, our team at TS Partners will certainly keep a close eye on how HMRC’s tax transformation efforts continue to take shape.
In the meantime, if your own organisation requires specialised knowhow in such matters, please don’t hesitate to enquire to us to learn more about how we can help.
It isn’t just businesses up and down the South West of England and beyond – including many that have reached out to TS Partners about our digital accountancy in Plymouth, Wellington, or Newton Abbot – that have been looking to modernise their approaches to tax in recent years.
That’s because, since HM Revenue & Customs (HMRC) announced its Making Tax Digital (MTD) scheme in the mid-2010s, the tax office has been seeking to revamp its own systems for three business taxes – VAT, income tax self-assessment, and corporation tax.
The focus of the initiative has been on digitising records and moving bookkeeping online. However, the digital tax drive has now been the subject of criticism from the National Audit Office (NAO), which has said the programme is more than three years late and has exceeded its original budget by more than £1 billion.
What has the NAO said about the situation with Making Tax Digital?
In its report entitled “Progress with Making Tax Digital”, Parliament’s spending watchdog said that HMRC’s plan for the digital transformation of tax had failed to properly take into account the upfront costs imposed on millions of taxpayers.
The NAO report stated that the tax body had left out significant costs to customers from key business case documents that had sought approval for additional funding.
HMRC had intended to transfer its tax systems and records onto a modern tax management platform by 2020. However, the NAO said that this original deadline for getting the system up and running was “not realistic”, with it now being anticipated that the scheme will cost £1.3 billion, compared to the £226 million officials had budgeted for in 2016.
Although there have now been four delays to Making Tax Digital, the taxman has made a certain amount of progress with the initiative. Some 3.2 million tax records have been moved onto the new HMRC IT systems, but more than 14 million files are still awaiting transferral.
Since 2019, VAT has been processed with the use of tools from Making Tax Digital. Self-assessment, though, has ended up being “far more complex”, and has been subject to continued delays.
The tax office’s efforts to deliver the new system on time have also been hampered by a need to redirect resources to deal with Brexit, as well as staffing constraints during the COVID-19 crisis.
In May last year, HMRC had forecast that taxpayers would face total net ongoing costs of around £900 million over five years in order to achieve MTD compliance.
However, the tax body’s business case for the project had not accounted for the cost of obtaining tax advice, and the expense that customers would incur in updating their own systems.
Was the original aim of putting MTD in place by 2020 “never viable”?
Chairman of Parliament’s Committee of Public Accounts, Meg Hillier, said that it was “never viable” to implement Making Tax Digital for a 2020 deadline, adding: “HMRC wanted to increase tax revenue, but completely underestimated the cost and scale of work required to move from its legacy systems and by business taxpayers to move to digital records.
“Eight years on, many tax professionals remain unconvinced by the proposed approach, which imposes significant costs and burdens on many self-assessment business taxpayers… [HMRC] now needs to demonstrate its plans add up.”
A spokesman for HMRC, however, said it welcomed the watchdog’s “recognition of our progress in digitalising the tax system, and its confirmation that our plans can improve the system’s efficiency and effectiveness.”
The tax office added that MTD would “deliver a strong return on investment for the taxpayer.” It has now targeted 2027 for the implementation of its digital tax regime for self-assessment, although the review body said this still seemed to be a “very challenging plan”.
Reach out to TS Partners to learn more about our own services in digital accounting
As professionals with no shortage of expertise and experience ourselves in digital accountancy in Plymouth, Newton Abbot, and Wellington, our team at TS Partners will certainly keep a close eye on how HMRC’s tax transformation efforts continue to take shape.
In the meantime, if your own organisation requires specialised knowhow in such matters, please don’t hesitate to enquire to us to learn more about how we can help.