Making Tax Digital - Not Worth It?

46 people online!
June 25th 2022
Tax Week 12
try our free mobile apps!

Making Tax Digital - Not Worth It?

Costs to users increased and revenue for Treasury downgraded in new forecasts.

HMRC is making VAT return filing via its new online digital tax system mandatory in seven months time for businesses with taxable turnover above the VAT threshold, £85,000. However, rather than providing cost savings for taxpayers there will instead be increased costs over the longer term.

New forecasts by the Taxman show businesses will end up paying over £35 million extra per year in order to keep records as required by the Making Tax Digital initiative.

Initial forecasts by those in charge of putting together the system were based on all businesses being compulsorily enrolled into the system, but due to the clash with 'Brexit' dates next April, only businesses with turnovers above £85,000 have to digitally file records. Most of the cost savings were attributed to those under the £85,000 threshold, the majority of whom use paper/spreadsheet accounting methods.

The shift in the roll-out also means the Taxman will be netting over £400 million less in revenue than original forecasts predicted.

It's not all doom and gloom for the Taxman as the forecasts don't include tax reliefs taxpayers can use on accounting costs they incur as well as even longer-term forecasts that show by 2023 an additional £1 billion in tax revenue for the Treasury.

The entire development plan was envisaged by former Chancellor George Osborne and the aim was to reduce the manual load on HMRC staff to process payment records and use modern computing techniques to discover anomalies within tax submissions.

Small businesses are voicing concerns about increased accounting costs in scenarios where software has become cloud-based at a monthly running cost rather than a one-off off the shelf package, with the tax return filed using HMRC's own tools.

There are still opt-out options available to taxpayers where HMRC can allow use of the current existing methods if " is not reasonably practicable for you to use digital tools to keep your business records or submit your returns, for reasons of age, disability, remoteness of location or for any other reason...".

Tagged in:

making tax digital mtd
Jump to topic:
Browse Archives:

Help - find relevant tax tools and calculators - go back to top

Answer a few questions below and we will list relevant tax calculators and tools that can help you organise, budget and ultimately save you money!
are you an employee?