Making Tax Digital

[etf]

Whilst Sir Jim is perhaps sipping a cocktail in retirement, MP Murray and Sir Jim's replacement will be held responsible for the disaster that is predicted below...yikes!


By FactChecker
18th Mar 2025 16:49
Whilst (of course) agreeing with all your points about the 'proper' (aka proven) way to get from blank paper to successful launch of a brand new software/service ... I've got one other even more pragmatic issue in mind for HMRC to consider.

Now that we've been told "around 795,000" taxpayers will be required to register for phase 1 ... and given that other recent article of Tom's showing that over 40% of those who filed their SA by 31st Jan were unrepresented ... how many phone-calls is HMRC expecting to handle each and every Quarter (first month of each of those)?

Whether it's registration-related or submission-related or more of a bookkeeping issue ... a substantial %age of c 35,000 people will be raising queries every 3 months.
And that's on top of the (hopefully more pertinent but probably tougher) questions raised by agents ... and before those numbers are trebled a year later!

What resources are to be allocated to handling this?
And how will any such attempt impact on all of HMRC's other 'support' services?
Potential for meltdown of the tax collection service would seem an understatement.

[etf]

If MP Murray, to be known as 'Reckless MP Murray' going forward in this thread, continues to press the MTD4IT proceed button, he will demonstrate that HMRC have learnt nothing from the introduction of NRCGT where they ignored all warnings signs. Even Rebecca B used a politer version of Cluster to describe the shameful section of Tax history that followed.

HMRC's prediction skills suggest even if you presented them with the winning lottery numbers, they would fail to win the lottery...see their inaccurate forecasting of MTD4IT costs below:



By Ian McTernan CTA
18th Mar 2025 10:05
HMRC estimates the average transitional cost to be £320 and the average annual additional cost of £110

Someone should force HMRC to revise those figures to something even remotely close to reality!

Annual additional cost of software alone will be £250+.

Annual additional cost from us agents for all the additional work: TBA.

Benefit to taxpayer: zero.


Replying to Ian McTernan CTA:

By ireallyshouldknowthisbut
18th Mar 2025 12:34
We have modelled pricing on this, and given the fine should be no more than £800 for not doing the four quarters, we would struggle to file for less than that from excel or other mixed records on a "do it properly" basis.

The only plus is our fees are tax deductible, so if we charged a small landlord £200+VAT/quarter, a BR client would pay net £768, saving £32 for all the hassle of quarterly filing.

And nothing off the year end.....

The only option is to force them onto unsuitable software* and have them flail at the keyboard and hope for the best. A lot of clients are going to be in tears over this.

*If software was suitable for such clients, they would already be using it, our clients are not the refusnik idiots that software companies suppose they are, so by definition for those not using it, it is unsuitable.

[etf]

And in the background the greedy software companies chant....'Do it, do it, do it'.

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robbob got to this conclusion 3 1/2 years ago....is he a prophet?

Postby robbob » Wed Sep 22, 2021 10:46 am

more effective
5 submissions per year rather than 1 how is that more effective?

more efficient
5 submisions per year how is that more efficient ?

easier for taxpayers to get their tax right ?
So its easier to break one simple annual task down into 5 sub sections that need to be aligned as appopriate. When was quickly adding and submitting frequently under time constraints safer than doing once a year at a time that suits the individual - have they thought some bods might actually go on holiday for 6-8 weeks? probably not


With their logic it would be easier to do car tax renewals 5 times a year

[etf]

I suggest MP Murray and RR keep the hard hats they are given when publicising building projects....might just need them when this kicks off....waiting for the pair of them to appear on the Muppet Show.

MTD IT to be expanded in April 2028
by Emma Rawson
Today’s Spring Statement included a number of surprise Making Tax Digital announcements, including confirmation that the income threshold will be lowered to £20,000 from April 2028. Emma Rawson looks at what was announced, and what it might mean in practice.

By ireallyshouldknowthisbut
26th Mar 2025 16:08
Software co's rejoice - forced to pay for filing returns when the old SA system is already fully functional and working, and will still need to be run in parallel

So
1. increased costs for tax payers
2. Increase costs for HMRC running two systems
3. Huge costs for HMRC for those swapping between systems and all the mess that will cause
4. For.........................nothing tangible at all for any party other than time and costs expended.

In practice tax take will be *down* as more on the edges shift to not declaring anything as its in the "too hard" pile and they don't have the ££££ to hire an accountant.

Software companies have worked an absolute blinder here in creating their own market out of a highly complex and unnecessary system - for something the state used to provide for free, and still has to!

By Paul Morton
26th Mar 2025 17:11
Like others, that's me out in a year or so time. This is a disgraceful decision when so many people are struggling and yet they increase the burden and the cost to them. Clearly they only want one term in office and then they can then all do after dinner speaking (and be in MTD of course) and take directorships.

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There may be a shortage of accountants too:

By bluebaron
26th Mar 2025 17:31
I'm fuming about this, and will never get involved in it. I now hope to be virtually retired in my mid fifties (which isn't too many years away). When I warned a small now ex-client about MTD IT last year, he could not believe that he would soon be forced to use software, submit quarterly data, and pay more in software / accountancy fees. This rush to the £20K threshold is a disgrace.

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Pretty positive feedback all round (one of the most thanked responses):

By mkowl
26th Mar 2025 15:41
Don't you just love the politicians / civil service- speak a lot know the square root of nothing about practical day to day life

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By David Moss
26th Mar 2025 15:50
So, just as we get used to it all, they change the rules again and bring in an extra complication with the complete journey scenario. Remind me, who is this supposed to benefit? (I think even the software vendors are fed up of the constantly moving goalposts)


By JohnB
26th Mar 2025 15:50
MTD will not be providing any information that the 4 (sometimes 12) VAT returns already submitted by the majority of businesses per annum could provide.

The problem is an unimaginable lack of knowledge and competence on the part of our rulers, (MP Murray...think he means you) who simply are either oblivious to, or complicit in, the ever increasing burdens being placed on small businesses.

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By Mike Warburton
26th Mar 2025 18:14
Emma

I have just filed an article for the Daily Telegraph headed
"Making Tax Digital is a disaster in the making"

Several of your readers seem to agree!

Mike


Replying to Mike Warburton:

By Justin Bryant
26th Mar 2025 18:40
If only RB (and the PBs) would do the same, one or more (currently clearly deluded) Government decision-makers might actually pay attention to this inevitable mother of all car crashes!

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Labour just forced an extra 900,000 people to comply with HMRC’s disastrous digital drive
Mike Warburton
Thu, March 27, 2025 at 8:00 AM GMT 3 min read



The Making Tax Digital (MTD) for self-assessment project was originally announced in 2015 and was expected to be in place by 2020.

Despite serious concerns, the Labour Government said in the Spring Statement that it is pushing ahead – and confirmed an extra 900,000 landlords and freelancers will have to comply.

Making Tax Digital is already in operation for VAT. Since April 2022 all VAT registered business have been required to keep digital records and file returns through MTD compatible software.

The main goals of MTD for self-assessment stated by HM Revenue and Customs (HMRC) at the time were to make tax administration more effective, more efficient and simpler for taxpayers.

Unfortunately, it has not worked out that way. As with many large projects it has experienced a series of problem and delays.

MTD will apply to landlords as well as self-employed individuals.

It has three main components; digital record-keeping, quarterly updates and year-end reporting. The digital record-keeping requires the amount, category and date of business income and expenditure to be recorded in software. The digital records will then be used for the quarterly updates. In summary, totals of income and expenses which then have to be submitted to HMRC at the end of each quarter.

In 2018, the National Audit Office (NAO) concluded that it expected MTD to cost rather than to benefit business taxpayers. It reviewed the project again in 2021 and reported that the problems were continuing, including:

having unrealistic ambition and timescales, with unknown levels of risk

not engaging adequately with commercial partners

underestimating the complexity involved in moving from legacy systems.

The NAO report in 2023 was equally damning. While conceding that the vision of HMRC to digitise the tax system had the potential to bring about a step change in efficiency and effectiveness, it concluded that the timeframe set by HMRC was unrealistic in that it did not allow sufficient time for HMRC to explore the full range of options that would achieve the programme’s aims and select one that it could implement.

In particular, the NAO criticised HMRC for damaging credibility and failing to demonstrate that the project represents value for money.

Fast-forward to 2025 and again the Government is both pushing ahead and widening the scope of the businesses involved.

In a technical document issued alongside the Spring Statement, the Government has confirmed that the Making Tax Digital rules will start from April 2026 for sole traders and landlords with qualifying income over £50,000 and extend to those with incomes over £30,000 in April 2027.

However, it has also announced that it will now be extended to sole traders and landlords with income over £20,000 from April 2028. It is estimated that this decision to reduce the threshold to £20,000 will result in 900,000 sole traders and landlords being brought into the net from April 2028 as a consequence.

While the objectives may be sound, I am very concerned that once again HMRC and politicians are pushing ahead with this expansion without waiting to assess how the project works for larger businesses.

The NAO reports do not give me confidence that all the problems have been solved. The various accountancy bodies have been doing a sterling job in attempting to get their members and clients ready for the change but even with the time to prepare, I fear smaller businesses may struggle. It would surely be better to let the system bed down before making a commitment to extend it.

Finally, while I recognise that there is a build-up in unpaid tax liabilities which needs to be addressed, was it really necessary to announce a dramatic increase in the late payment penalties for tax returns from April 2025? They will hit just as the new rules come in.

It all smacks of a government more concerned about raising money than helping business cope with the changes being introduced. Small businesses are, after all, the life blood of our economy which the Chancellor claims she is keen to grow.