HMRC’s Making Tax Digital (MTD) regime is pointless, as the Treasury will receive no additional tax take, despite taxpayers reporting burden increasing, say leading audit, tax and business advisory firm, Blick Rothenberg.
Fiona Fernie, a Partner at the firm, said, “Under MTD self-employed people and businesses will have to report their taxes quarterly, not annually. This will not change their actual tax liabilities, or the payment dates on which income tax has to be paid. Which begs the question, what is the point of MTD?
“HMRC’s press release, ‘Customer Costs and Benefits for the Next Phases of Making Tax Digital’, published on 23 September 2021, said that MTD is designed to deliver a wide range of benefits, including making it easier for businesses to keep on top of their tax affairs and enabling them to see real-time data on the health of their finances.
“However, this is a weak attempt to justify the introduction of MTD, as it is perfectly possible to obtain these benefits by using an up-to-date spreadsheet and the Government Gateway. MTD requires businesses and individuals to pay for third party software to do their returns as opposed to these free methods.
“Because of this, I find it difficult to believe another statement in the press release, that businesses already using MTD are reporting saving on admin time, reductions in input errors and increased confidence in managing their tax affairs. It is not possible to determine whether people are making more accurate returns because they use MTD. Data entry is just as likely to be done incorrectly on an MTD platform as on a spreadsheet or the Government Gateway.”
Fiona added, “The Institute of Chartered Accountants in England and Wales (ICAEW) does not think that MTD will help small businesses and has written to HMRC suggesting that far from providing businesses with more time, the administrative burden of quarterly updates is disproportionate and needs a rethink.”
“The concept that taxpayers are hit with an obligation to file additional returns, but will not be provided with the means to do so unless they incur a cost feels unfair. This appears to fly in the face of the taxpayers’ charter which specifically states: ‘We’ll provide services that are designed around what you need to do, and are accessible, easy and quick to use, minimising the cost to you.’
“The cheapest software I have found so far is £150 per annum, HMRC also talk in their document about cost of training and transitional costs for small businesses which they estimate at around £330. For smaller businesses and sole traders with lower incomes, this could be a significant hit to their finances.
“From April 2026, individuals and businesses with a gross income of £50,000 or more in the year to 5 April 2025 will be required to report their income, and expenditure, on quarterly tax filings, with the first filing due by 7 August 2026. From April 2027 those with gross income of £30,000 per annum, and from April 2028 those with gross income of £20,000 – £1,667 per month, will join the regime.”
