Making Tax Digital (MTD) is ‘out of control’, with HMRC vastly underestimating development and implementation costs and overestimating the benefits to the exchequer of its flagship scheme, says the Chartered Institute of Tax (CIOT) and the Association of Taxation Technicians (ATT) following a report from the National Audit Office.
The two bodies contributed to the report and have repeated their calls to review the business case for MTD, after the report suggested the scheme is now expected to cost around five time its original 2016 budget and excluded upfront costs of £1.5 billion to VAT and Self-Assessment customers from its business case.
Chair of the joint CIOT and ATT Digitalisation and Agent Services Committee, Alison Kerrey, said: “HMRC and government’s execution of this major change to the tax system feels like it is out of control, with spiralling costs, unrealistic timescales and questionable benefits. While we support digitalisation, the report backs up our concerns that HMRC’s estimates have vastly underestimated costs to taxpayers and overestimated benefits to the exchequer – it is time to pause and take stock.”
The report indicated that MTC was announced before any business case had been prepared for it, with later cases in May 2022 and March 2023 seeking additional funding omitting the significant up-front costs for taxpayers.
It also noted that during 2022-23, moving VAT records onto its new system initially led to VAT liabilities being overstated by around £5 billion. HMRC will only move one year’s taxpayer data for Self Assessment.
Kerrey continued: “We have repeatedly questioned whether the business case for MTD stacks up and fully agree with the NAO that a fresh, complete business case needs preparing. Even the latest estimates of a 2:1 return on investment still seems marginal, based on experiences to date with spiralling costs, speculative revenue benefits, and the need to operate two systems for the foreseeable future.”