Making Tax Digital

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ChatGPT CONFIRMS MTD is going to be bloody expensive for business...especially for smaller operators.


Why is making tax digital going to be expensive for business?

ChatGPT said:
Making Tax Digital (MTD) is an initiative by the UK government aimed at making the tax system more efficient by digitizing and automating the process. While MTD has some long-term benefits, it can be expensive for businesses, especially in the short term. Here are a few reasons why:

Software Costs: Businesses are required to use HMRC-approved software to file taxes. For many businesses, this means upgrading their existing systems or purchasing new software. These software solutions often come with monthly or annual subscription fees, adding ongoing costs to business operations.

Training and Skills Development: Employees may need training to use new digital tools and understand the updated process. This training can be time-consuming and costly, particularly for smaller businesses that might not have the resources to dedicate to staff education.

Implementation Costs: For businesses with complex financial systems, integrating new digital tax reporting systems can require significant changes. These changes might include updates to their accounting processes, IT infrastructure, or even hiring external consultants, all of which incur additional costs.

Ongoing Compliance: MTD requires more frequent reporting, sometimes quarterly instead of annually. This could lead to increased accounting and administrative workload, requiring businesses to hire more staff or pay for additional accounting services to stay compliant.

Data Security and Infrastructure Upgrades: With more business financial data being stored and processed digitally, there’s a need for enhanced cybersecurity measures. This might involve upgrading IT systems to protect sensitive tax data, which comes with its own costs.

Small Business Burden: Smaller businesses with fewer resources may find it particularly difficult to keep up with the transition. The costs of complying with MTD might disproportionately impact them compared to larger companies that already have digital systems in place.

Penalties for Non-Compliance: If businesses fail to comply with the new requirements, they may face fines and penalties. This creates additional financial pressure as businesses must ensure they remain compliant to avoid these costs.

Overall, while MTD may streamline processes and reduce errors in the long run, the initial costs of transitioning, maintaining compliance, and ongoing operation can add up significantly for businesses.

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Replying to Richard Hattersley:

By Open all hours
27th Feb 2025 17:48
Thank you. I really don’t envy you on this one. You personally must in your heart of hearts know what a ridiculous proposition MTD is. Quarterly harassment for no-one’s benefit for starters.

Yet professionally you have to plough the furrow as dictated by those who neither know (HMRC) or care (shyster software inc).


By Tornado
26th Feb 2025 23:52
This is starting to look like fun.

Sit back and watch the circus begin

Replying to Tornado:
ghm
By TaxTeddy
27th Feb 2025 08:47
Couldn't agree more.

When this bedlam started, we rolled up our sleeves and studiously examined all of the documentation to work out exactly what we would need to do, a timetable for action, and a list of clients who would be affected........

Gradually, we learned to be more relaxed as it got kicked further and further down the road.

And at this point, I am standing on the sidelines, enjoying the show.


Replying to Tornado:
Rob Swan
By Rob Swan
27th Feb 2025 08:56
With you there Tornado.

The 'Circus' has some 'Clowns' performing at FAB I believe.


Replying to Rob Swan:
Tornado
By Tornado
27th Feb 2025 12:00
Where are the Clowns
Send in the clowns
Don't bother, they're here


Rob Swan
By Rob Swan
27th Feb 2025 08:57
Clearly, HMRC have more optimism than competence.

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I suspect many people share John's viewpoint.


By JohnB
06th Mar 2025 09:50
If I understand correctly:

1. There is no financial advantage in MTD for HM Government. They have told us that it's only about helping the taxpayer.
2. There is no advantage to the taxpayer since the costs will outweigh any possible benefits.
3. The government already gets at least 4 quarterly financial returns per annum from any business with over £90k turnover, giving a summary of the income and outgoings (otherwise known as a VAT return) therefore they have no need of the MTD submissions.
4. Software companies will be set to make millions out of the scheme.

As always, follow the money and you'll generally find what's behind anything.

[etf]

Sir Keir announces MTD4IT will be cancelled?.....

Sir Keir Starmer will vow to slash bureaucracy as he sets out his plan to reshape the state

.....errrh has he told MP Murray that taxpayers having to file 5 or 9 income tax returns a year instead of one will stop them getting on with their money making activities and cost them dosh they cannot afford to implement this crazyness .....talk about Labour's mixed messages.

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And it is crazy:

By Rob Swan
12th Mar 2025 16:28
Top of the bill.... HMRC

(His Majesty's Royal Comedians)


Replying to Rob Swan:

By AdamJones82
12th Mar 2025 16:49
"Heard the one about the organisation which implemented a system to collect data more often while doing nothing with the information?"


Replying to Open all hours:

By Open all hours
12th Mar 2025 17:13
Ladies and Gentlemen, give it up for an act you simply won’t believe - Jim Harra and The Knighthood

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By ireallyshouldknowthisbut
12th Mar 2025 19:06
Well it might happen.
It might not

I will worry about shoving low quality data into HMRC servers at the point at which not doing so will cost more to my clients, than doing so. Its a commercial compliance decision which has no bearing on tax liablities.

My mailer out to affected clients is already drafted along the lines of "ignore this rubbish, dont buy any software, dont change anything, we wait and see"

Musk dream of manned flight to Mars, but has not achvied it with all his billions
Branson has *still* not got his commercial 'edge of space' thing launched despite it being 18 months away for the past 10 years.
Dreaming and wishing things into being doesnt solve the underlying problems inherent in them.

By FactChecker
12th Mar 2025 19:24
Did anyone ask Ogilvie ANY of the embarrassing questions that have been raised on here over the last couple of years (the vast majority of which remain unanswered)?

Embarrassing in the simple sense that HMRC appear not to know the answers - and yet, without those answers, there is as yet an incomplete system (one that completes the cycle through to the same end-point handled by an SA return and its subsequent handling by HMRC).

If the questions were asked ... where are the responses ('answers' might be too great a hope)?
If not ... then why on earth not (isn't that the purpose of all this activity - to get useful info/help)?

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By AndyTall
14th Mar 2025 11:57
At no point has the government point had the slightest interest in listening to the rep bodies, or anyone else, on the need to scrap MTD and do something that was not actively counter-productive.

I am an ICAEW rep at the Compliance Reform Forum, we shot the MTD plan to pieces on announcement, and repeatedly thereafter for months at every level of engagement with HMRC and the MTD team as did everyone else they spoke to, I have never seen so much push-back to a government project. We might as well as been speaking Martian.

The IT geeks leading the project had decided how to fix the tax system and persuaded the govt that MTD would raise revenue and cut costs, the government needed to believe them so it mandated MTD, and HMRC and the rep bodies just had to try to make the best of it..

What the rep bodies have managed to do is reduce the mission creep - companies were supposed to be in MTD by now for example, push back at systems not being ready and argue for delays in implementation and various other damage mitigation strategies.

Please remember that the government is in charge. Rep Bodies can lobby on a policy, but that's all - we have no authority over HMRC or Government beyond the respect that we have built up only because we engage on their terms in ways that they see as beneficial to them.

So sadly where we have been for some years now is "minimise the damage", "do the IT introduction as well as possible to maximise IT-aspect benefits", "delay it until its at least faintly functional" and "keep the evidence and challenge after it finally goes live so we can kill it asap when the political will permits".

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By Tornado
14th Mar 2025 11:26
I have been looking back at my posts from 2016 to now and there are many that highlight the potential problems with MTD most of which have come to pass. I was, of course not alone in my views as a search of the Archives will show, so the real question is why are there still problems arising with this project after all this time. This indicates to me that the project is unworkable and I think we should be spending more time in pressing HMRC to cancel it or substantially pare it down rather than pointlessly trying to work out ways of how to use it.

I have been in business a long time and like Rebecca, I believe that I give a first class service to my clients which is backed up by the fact that many of them have literally been with us for decades and several for over 50 years. This service is based on assessing the skills and needs of my clients so that they can spend more time on what they do best and thus grow their businesses. They do not need to be told by the Government how to run their businesses but they do need to have the best advice and help from those that know what they are doing such as the many Professionals that are available to those in business.

Although a bit of a cliche, I have clients who started off selling goods from a van and now have multimillion businesses, and I have been with them all the way. I think I am doing something right.

MTD is a chaotic system cobbled together with string and sealing wax and whilst we can only guess how much of it works at the moment, as far as I can see from the reticence of some software developers, they are not convinced that they should spend time on it at the moment.

I have said on many occasions that I respect what Rebecca does and believe that she really cares for her clients and other practitioners but when it comes to MTD, I think it would be more helpful to all of us if instead of trying to work with MTD, she stood up and joined the hundreds of AWEB members and thousands of others who think this project is unworkable, and push the Government to delay it until it has been proven to work properly, cancel it entirely or drastically change the way that it is supposed to work.

If Rebecca had that sort of courage then I would be happy for her to be made a Dame!

I am, of course, definitely not alone in the way I feel, but if my attitude was to sit back and do nothing when I thought there was an injustice, then my clients would have lost out and not benefitted from me standing up for them when HMRC have been erroneous or unreasonable over many different matters on many, many occasions.

Just because something is legislated does not mean that it is right, achievable or what the people want. After all, the Government works for us, we do not work for them and they are obliged to listen to us.

Rebecca is in a unique position and looking back on some of her recent posts, she has spent many hours for no payment in the development of MTD. I do not doubt that she cares about her clients and genuinely wants to help, but in this matter, I think she would be serving her clients better by standing up to this insidious project.


Replying to Tornado:
By flightdeck
14th Mar 2025 12:04
Fantastic comment!

They have to want to listen though and it strikes me they have no interest in what the field experts are trying to tell them (people like yourselves). I think they have a "we know best and at 30,000 foot it looks pretty simple". I find it depressing.

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Another person realising Labour say one thing and then do the exact opposite......economy going backwards before this hits the fan too.


By Open all hours
13th Mar 2025 19:54
I’d like to think that if I was RB I would have done what I could and when it became obvious that I was not being listened to I’d have quit in a blaze of publicity.
I still maintain that MTD increases fees for less accurate work and is the last thing we need in the current economic climate.
Ellie Reeves MP (familiar name) said on Politics Live today that it is the aim of the government to cut business admin costs by 25%. MTD does the opposite. It may be an inevitability but it is still just plain wrong.

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The tide appears to be turning....will MP Murray finally realise his decision to proceed is flawed. When taxpayers realise they have to file four meaningless returns at a greater cost you can imagine the negative press Labour will receive.


MTD turns 10: ICAEW flags continuing digital doubts

A decade since Making Tax Digital for income tax was first announced and a year until its mandation, accountancy body ICAEW has expressed concerns over aspects of the project, including its quarterly update element, the cost of compliance to taxpayers and a lack of software clarity.

By Rob Swan
18th Mar 2025 09:05
10 years on and..... Nothing!
That's (most definitely) a 'Failure to Launch'!

Well, at least ICAEW are 'speaking up', and IMHO reflective of the general mood in the profession. Whether it happens or not, now (2026) or... never, MTD is a disgrace. HMRC still can't send clear messaging and there's still a lot of doubt over many aspects, with just one year to go. And, (if you're reading this, HMRC), "It's definitely going ahead in 2026" is NOT 'clear' messaging.

FWIW, the way to do MTD properly is to develop the system, implement it gradually, provide clear benefits to taxpayers/agents using it, then mandate it. And before you do any of that you might want to consider simplifying the tax system/legislation so it's actually possible to automate without needlessly complex systems - but that's on Ministers, not HMRC. All HMRC have 'mandated' so far is pie-in-the-sky.

As ever, time will tell.

Rant over


By ireallyshouldknowthisbut
18th Mar 2025 09:29
Tom,

Nice to see some balance in your article after the relentless pro-MTD barage in recent weeks from the "above the line" material.

Accountants who are against this project are not anti-tech, or backward, or sticking their head in the sand, they know their business, know their clients and know its a complete waste of time and energy.

This is in my Q&A's out to clients. Remember, unlike HMRC and software houses, as an ICAEW member I have a duty of care to my client to be honest.

Q is this 5 tax returns?
A No. The four quarterly reports have no tax function. The final “5th period” return will determine your tax bill.

Q So what are HMRC doing with the data?
A Nothing. It is intended essentially as a “tick on the register” that your bookkeeping is being done digitally. Some software will give projected tax bills but I would suggest that would be liable to considerable error given the input data is not prepared for tax purposes.

Q Why are we doing this again?
A ‘There is no business case I can see for my clients, or any obvious advantage for HMRC. This seems to be largely a “sell” from software firms looking for business. This is pure red tape.

Q So this project completely pointless?
A Yes.