HMRC admits Making Tax Digital could cost British business £37m a year
03/09/2018 / Comments 1
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.
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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.