Blog

HMRC admits Making Tax Digital could cost British business £37m a year

03/09/2018 / Comments 1

HMRC admits Making Tax Digital could cost British business £37m a year

The Making Tax Digital (MTD) scheme, which was forecast to save British business £100 million a year from 2021, could end up costing £37 million a year, HMRC has admitted.

The digital overhaul of the tax system is a key part of the government’s plans to make it easier for businesses and individuals to get their tax right and keep on top of their affairs.

Original forecasts suggested that businesses could expect massive cost savings from the changes.

But now, as the start date approaches, HMRC has revealed in its annual report that there will be no cost savings and the extra work could end up costing businesses a large sum.


Related posts:


From 1st April 2019 those affected will be required to register for MTD, maintain a digital record of their VAT transaction and file MTD-compliant VAT returns direct from their own software – meaning the end of the annual tax return for millions.

The plans are expected to provide users with better use of information, give access to tax in real time, provide a comprehensive financial picture in one single digital account and allow for interaction with HMRC digitally and at more convenient times.

Initially, the plan was to include all businesses, but now only companies with a turnover of more than £85,000 will be required to file returns digitally.

This decision to change the pace and scope of the roll-out resulted in revised forecasts being issued.

HMRC now forecasts that there will be lower transition costs, but that ongoing costs will outweigh ongoing savings for businesses by £37 million a year in the long term.

It has been suggested that most of the original savings forecast would have been made by companies who operate under the threshold and rely on paper-based accounting systems.

The scheme was originally expected to generate £920 million of additional tax revenue by 2020-21 by minimising errors on record keeping and reporting.

But, due to the slower launch, MTD will generate £440 million less by that time than first predicted. 

HMRC claims that, by 2023, MTD will still have generated £1 billion in additional tax revenue.

What do you think? Will Making Tax Digital benefit your business? Or is it just another expense? Let us know in the comments below.

Comments

1 Comment

Alan Edmunds

13/09/2018 (09:56am)

I have been involved in accounts for many years and my thoughts are that this must cost business more money. Accountants who submit a companies audited accounts annually are going to have to charge more for doing them every quarter. First we had RTI for payroll, which is not a real hassle to do, then we had the AE pension, which is a bit of a hassle depending on the clients choice of pension provider. I put up my rates for both of these and now will probably need to put them up even more for MTD. How is that beneficial for the SEM's that I deal with. Many SEM's whose wife does the paperwork efficiently from home will not stand a chance and an accountant will need to be engaged. Still it may bring the unemployed figures down within the accountancy profession as long as it does not bankrupt the smaller SEM's. We have a high skills shortage in some of the important trades such as building and welding areas which the government does not seem interested in and these extra costs will not help.

Some of the funders we work with

  • IGF Invoice Finance
  • Nucleus Commercial Finance
  • Aldermore Invoice Finance
  • Lloyds Bank Commercial Finance
  • Secure Trust Bank
  • Assetz Capital
  • Davenham Trade Finance
  • Working Capital Partners
  • Skipton Business Finance
  • Woodsford Tradebridge
  • Santander Corporate & Commercial
  • Innovation Finance
  • Team Factors
  • Royal Bank of Scotland
  • Trade Finance Partners
  • Barclays
  • Investec
  • Close Brothers Invoice Finance
  • iwoca
  • Asset Advantage
  • Positive Cashflow Finance
  • Regency Factors
  • Leumi ABL
  • GapCap Cashflow Finance
  • Metro Bank SME Finance
  • Spotcap
  • Roma Finance
  • InvoCap
  • ABN AMRO Commercial Finance
  • Ultimate Finance Group
  • Calverton Finance
  • Everline
  • Platform Black
  • Partnership Invoice Finance
  • Creative Capital
  • Outsauce
  • Shawbrook Business Credit
  • Market Invoice
  • Catalyst Finance
  • 1pm
  • Davenham Asset Finance
  • Henry Howard Cashflow Finance
  • Pulse Cashflow Finance
  • Bibby Financial Services
  • PNC Business Credit

Authorised and regulated by the Financial Conduct Authority (FCA number 730445)
We are a credit broker and not a lender and offer credit facilities from a panel of lenders

Our website uses cookies. For more information about managing cookies, visit our Privacy and Cookie Policy. Continue