Progress with making tax digital

Public Accounts Committee Closed Inquiry
Opened: 16 May 2023 Closed: 8 Mar 2024 Parliament page
Making Tax Digital (MTD) is HMRC’s flagship transformation programme. It aims to help businesses reduce errors in their tax records, through the use of digital record-keeping and by requiring them to submit quarterly updates using MTD compatible software. HMRC also intends to move processes and tax records onto a modern … Read more
33 Conclusions
1 Report
1 Oral session
1 Letter
1 Event
Activity timeline 5 events
8 Mar
2024
Report published
24 Nov
2023
Report published
3 Jul
2023
Correspondence
19 Jun
2023
Oral evidence
19 Jun
2023
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 1 session
19 Jun 2023
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Progress with making tax digital
Jim Harra CB · HM Revenue and Customs Jonathan Athow · HMRC Jo Rowland · HM Revenue and Customs
Title HC No. Published Items Response
Eightieth Report - Progress with Making Tax Digital HC 1333 24 Nov 2023 33 Responded
Recommendations & Conclusions
33 results
2 Conclusion Rejected
Eightieth Report - Progress with M…
Resolve outstanding design issues for Making Tax Digital for Self Assessment with all stakeholders.
It is unacceptable that seven years in, with £640 million of taxpayer’s money spent on the programme as a whole, so many questions remain about how Making Tax Digital for Self Assessment will work. HMRC originally intended to introduce Making … Read more
Government Response
The government disagreed with the recommendation, stating it is not possible to robustly estimate the separate effects of frequent vs. digital submissions. They have instead applied MTD for VAT evaluation findings to MTD for ITSA, expecting a 15% tax gap reduction.
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3 Conclusion Rejected
Eightieth Report - Progress with M…
Ensure future digital tax system proposals demonstrably prioritise taxpayer needs and provide improvements.
HMRC’s design of Making Tax Digital has not taken sufficient account of the realities facing business taxpayers and agents. HMRC’s key aim for the programme is to make it easier for taxpayers to get their tax right and help reduce … Read more
Government Response
The government disagreed with the recommendation, explaining that while a priority is to make tax easy, they already engage extensively with taxpayer representatives (ABAB, expert panel, Customer Experience Committee) and conduct research to understand customer needs, publishing findings in TIINs.
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4 Conclusion Accepted
Eightieth Report - Progress with M…
Reassess customer compliance costs for Making Tax Digital and prepare a robust updated business case.
In seeking further investment in the programme, HMRC has not been open enough about the substantial costs that Making Tax Digital will impose on many taxpayers. In 2021, HMRC published research that showed customers will incur both upfront transitional costs … Read more
Government Response
The government agreed and stated HMRC has already reassessed customer costs for Making Tax Digital, which will be published in a Tax Information and Impact Note in Q4 2023-24. The next business case iteration will fully update on costs and benefits, ensuring all customer costs are included in the NPV calculation.
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5 Conclusion Accepted
Eightieth Report - Progress with M…
Explain how HMRC will assure realistic timetable and budget for Making Tax Digital for Self Assessment.
HMRC’s poor track record of repeated delays to the Making Tax Digital programme and its lack of conviction in its latest timetable gives us little confidence that it will deliver the rest of the programme on time. HMRC’s original delivery … Read more
Government Response
The government agreed and stated that the MTD for ITSA timetable was set following detailed internal planning and shared detailed plans/roadmaps with external partners. HMRC has also sought feedback on communication plans and is supporting beta testing to ensure preparedness.
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6 Conclusion Accepted
Eightieth Report - Progress with M…
Set out how HMRC will balance software product quality, safety, and liability for taxpayers.
We are concerned that the repeated delays and poor design of the Self Assessment phase of the programme is deterring software providers from developing quality 8 Progress with Making Tax Digital products and will ultimately put customers at risk. Over … Read more
Government Response
The government confirms it does not accredit software but operates a recognition process. It commits to listing approved software on a "Software Choices webpage" before MTD for ITSA and states it can remove problematic software from its systems, fulfilling the committee's request for how it ensures balance.
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1 Conclusion Accepted
Eightieth Report - Progress with M…
Committee took evidence on HMRC's progress with Making Tax Digital programme.
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on the issue of its progress with Making Tax Digital.1
Government Response
The government details existing robust governance processes for the Making Tax Digital programme, including Senior Responsible Owner (SRO) accountabilities, quarterly reports, and significant internal scrutiny mechanisms.
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7 Conclusion Rejected
Eightieth Report - Progress with M…
External events and lack of contingency caused Making Tax Digital delays and lost revenue.
HMRC also told us about the external events that contributed to the delays in the programme’s delivery. These included EU Exit and the COVID-19 pandemic’s impact on business taxpayers’ readiness and engagement, and government policy announcements, in particular the Health … Read more
Government Response
The government disagrees with the committee’s implicit finding of £1.75 billion in missed tax revenue due to MTD for Self-Assessment delays, providing its own OBR-certified benefit forecasts for MTD for ITSA.
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8 Conclusion Accepted
Eightieth Report - Progress with M…
Making Tax Digital for Self Assessment is complex with slow pilot and digital implementation.
Delivering the programme for Self Assessment is much more complex than for VAT. There are an estimated 11 million Self Assessment tax records that will need to be quality checked and moved to HMRC’s new system, 7.8 million more than … Read more
Government Response
The government agrees with the committee’s implicit recommendation to address delivery challenges, stating that it has already implemented measures. HMRC has assured its MTD delivery plan, secured funding, and is developing contingency plans, and has commissioned a data quality assessment for Self-Assessment records.
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9 Conclusion Rejected
Eightieth Report - Progress with M…
Making Tax Digital aimed to reduce tax gap by easing burdens for small businesses.
We asked HMRC to explain what Making Tax Digital was expected to deliver for the taxpayer, Exchequer and HMRC when the programme was launched in 2015. It said that Making Tax Digital aimed to make it easier for small businesses … Read more
Government Response
The government rejects the committee's observation, stating that it's not possible to robustly disaggregate the effects of MTD components, and presents evidence from MTD for VAT and OBR-certified MTD for ITSA benefits showing significant tax revenue reduction from error and failure to take reasonable care, expecting £780 million by 2028-29.
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10 Conclusion Rejected
Eightieth Report - Progress with M…
Taxpayer and agent representatives raise concerns over Making Tax Digital's increased burdens and costs.
We received written evidence from taxpayer and agent representatives that expressed their concerns over the additional burdens that Making Tax Digital would impose on businesses and taxpayers. For example, Crundell & Co Accountancy Ltd told us that Making Tax Digital … Read more
Government Response
The government rejects the committee's observation regarding additional burdens, stating its priority to make tax easy must balance with raising revenue and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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11 Conclusion Rejected
Eightieth Report - Progress with M…
Mixed evidence emerges regarding Making Tax Digital for VAT's actual benefits and costs.
We asked HMRC about the burdens that the Self Assessment programme would place on small businesses. HMRC told us that it had heard the same concerns ahead of the introduction of the programme for VAT as now existed for Self … Read more
Government Response
The government rejects the committee's observation regarding burdens on small businesses, asserting its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It describes ongoing engagement with taxpayer representatives and recent enhancements to policy and service delivery processes.
HM Treasury
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12 Conclusion Rejected
Eightieth Report - Progress with M…
HMRC targets real-time record keeping, but stakeholders question quarterly updates' usefulness.
We asked HMRC to explain what exactly it was aiming for with the introduction of quarterly updates through digital record keeping, given it was a source of concern for its stakeholders. HMRC said its aim was for customers to keep … Read more
Government Response
The government rejects the committee's observation regarding the aim of quarterly updates, reiterating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It details continuous engagement with taxpayer representatives and improved internal processes for considering taxpayer experience.
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13 Conclusion Rejected
Eightieth Report - Progress with M…
HMRC lacks specific plans for supporting vulnerable and digitally excluded MTD taxpayers.
We also received written evidence from the Low Incomes Tax Reform Group (LITRG), which told us that going back as early as 2016 it had repeatedly raised concerns about the additional cost and administrative burden Making Tax Digital will add … Read more
Government Response
The government rejects the committee's observation regarding concerns for vulnerable taxpayers and support, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It references ongoing engagement with taxpayer representatives and enhanced policy processes that consider customer experience.
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14 Conclusion Rejected
Eightieth Report - Progress with M…
HMRC relies on quarterly updates and direct software uploads to foster MTD compliance.
We asked HMRC, given the concerns about additional burdens on customers, how it would ensure that businesses complied with the programme and compliance didn’t decline. HMRC explained that there were two key requirements that it believed will foster good compliance … Read more
Government Response
The government rejects the committee's observation on ensuring compliance, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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15 Conclusion Rejected
Eightieth Report - Progress with M…
Stakeholders support tax digitalisation but express concerns about MTD programme deliverability and benefits.
Many of the programme’s stakeholders support the idea of digitalising the tax system.34 We received written evidence from The Association of Tax Technicians (ATT), which told us that it welcomed digital record keeping and the modernisation of the tax system … Read more
Government Response
The government rejects the committee's observation on stakeholder support for digitalization and concerns about deliverability, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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16 Conclusion Rejected
Eightieth Report - Progress with M…
Stakeholder engagement in MTD design sees little action on concerns, undermining confidence.
The NAO found that the success of the programme for Self Assessment will in part depend on working effectively with tax professionals to ensure smooth design, delivery and implementation of the programme. However, many stakeholders including HMRC’s own Administrative Burdens … Read more
Government Response
The government rejects the committee's observation regarding effective collaboration with tax professionals, stating its priority to make tax easy must balance with raising revenue and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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17 Conclusion Rejected
Eightieth Report - Progress with M…
HMRC implements "co-creation" approach and improved stakeholder engagement mechanisms for MTD.
In December 2022, HMRC established a plan to work with its stakeholders to solve issues. In March 2023 it started exploring with taxpayer and agent representatives how quarterly updates could work in practice. It explained that it was looking to … Read more
Government Response
The government rejects the committee's observation on HMRC's plans for working with stakeholders, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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18 Conclusion Rejected
Eightieth Report - Progress with M…
Stakeholders remain concerned about MTD implementation plans and HMRC's lack of responsiveness.
Stakeholders such as the Low Incomes Tax Reform Group (LITRG) remain concerned about how realistic HMRC’s plans for implementation are as well as HMRC’s lack of concern or planning for low income and vulnerable taxpayers.41 We also heard that stakeholders … Read more
Government Response
The government rejects the committee's observation regarding ongoing stakeholder concerns about implementation and support for vulnerable taxpayers, stating its priority is to make tax easy while balancing revenue raising and tackling the tax gap. It highlights regular engagement with taxpayer representatives and enhanced policy processes to consider taxpayer experience.
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19 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC significantly understated Making Tax Digital's additional costs for customers in business cases.
HMRC originally expected that Making Tax Digital would reduce the burden of submitting tax returns on customers. In June 2023, the NAO reported that HMRC now forecast that complying with the programme will create additional costs for customers, and that … Read more
Government Response
The government has agreed to reassess and publish customer costs for MTD for ITSA, including them in the net present value calculation of future business cases as per NAO recommendations. This follows recent design changes and revised income thresholds for the program.
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20 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC omitted significant customer costs from its Making Tax Digital business case analysis.
We asked HMRC why it omitted significant costs from the cost-benefit analysis it included in its May 2022 business case, and whether the decisions made on the basis of the business case would have been the same if this information … Read more
Government Response
The government agrees to reassess and publish MTD customer costs and ensure all estimates are included in the Net Present Value calculation of future business cases, addressing the committee's observation of past omissions due to 'technical interpretation error'.
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21 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC lacks detailed assessment of variable upfront transitional costs for businesses.
HMRC did not assess how many businesses would face different upfront transitional costs and was unable to say how many customers will face the highest upfront transitional costs or how this would vary for each income bracket. The average cost … Read more
Government Response
The government has agreed to reassess customer costs for MTD and publish these estimates in a Tax Information and Impact Note in Q4 2023-24, to increase transparency and inform taxpayers of expected costs.
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22 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC lacks clear plans for supporting lower-income and vulnerable Making Tax Digital taxpayers.
In December 2022 Ministers took the decision to delay the inclusion of taxpayers with Self Assessment incomes below £30,000 in Making Tax Digital due to concerns about customer costs and burdens. Many of HMRC’s stakeholders have welcomed this decision.49 However, … Read more
Government Response
The government has established an expert panel to consult on digital improvement ideas and provide specific support for vulnerable or digitally excluded customers, addressing the committee's concern about a lack of plans for these groups.
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23 Conclusion Accepted
Eightieth Report - Progress with M…
Making Tax Digital will impose substantial additional financial and administrative burdens on taxpayers.
Overall, HMRC’s latest figures indicated that if mandatory requirements were extended to those with incomes above £10,000, then business taxpayers could have to pay 46 Qq 64–65 47 Q 78; C&AG’s Report, paras 3.12–3.13 48 Qq 90–91 49 Q 65; … Read more
Government Response
The government has announced changes to simplify the design of MTD for ITSA and reassessed customer costs, with new estimates to be published in a Tax Information and Impact Note, addressing the committee's concerns about the burden on taxpayers.
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24 Conclusion Not Addressed
Eightieth Report - Progress with M…
HMRC delayed and rephased Making Tax Digital due to past delivery challenges and unforeseen risks.
HMRC received approval from government in December 2022 to delay and rephase the Making Tax Digital programme for its Income Tax Self Assessment (Self Assessment) customers.55 This gave HMRC a further two years to finalise the programme before introducing it … Read more
Government Response
The government response reiterates the previously announced delays and revised phased rollout for Making Tax Digital, but does not address the committee's observations about lessons learned, contingency planning, or confidence in preventing further delays.
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25 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC still has major design issues and development tasks to complete for Making Tax Digital.
In order to deliver the programme, HMRC still has: some difficult design issues to work out and fix; to fully run an unrestricted pilot to test systems and customer journeys; to test, cleanse and move Self Assessment taxpayer data in … Read more
Government Response
The government has implemented specific design changes for MTD, including a revised customer journey for jointly-held property and a commitment to allow multiple agents by April 2026, and updated eligibility criteria for beta testing, addressing outstanding design and pilot issues.
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26 Conclusion Accepted
Eightieth Report - Progress with M…
Critical design and technical issues remain unresolved for Making Tax Digital rollout.
We also received written evidence that highlighted some significant areas that needed design and technical solutions before the programme can be delivered.63 ICAEW’s written evidence said that currently the criteria for joining the pilot were too restrictive – which meant … Read more
Government Response
The government has addressed key design and technical issues for MTD, including a revised journey for jointly-held property, updated pilot eligibility criteria, and a commitment to allow multiple agents by April 2026.
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27 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC plans unrestricted Making Tax Digital pilot 12 months before mandatory introduction.
HMRC told us that it was aiming to have built sufficient functionality to be ready for an unrestricted and open pilot of the programme for Self Assessment 12 months before it is to be introduced as a mandatory requirement for … Read more
Government Response
The government has updated eligibility criteria for the MTD beta testing phase and committed to continuing private beta testing in 2024-25 and a public beta in 2025-26, aligning with HMRC's plans for an unrestricted pilot.
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28 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC faces significant data migration challenges for 1.6 million Self Assessment taxpayer records.
A significant task for HMRC is to move taxpayer data from its old Self Assessment system to its new tax system. HMRC told us that its old legacy systems hold records in a fundamentally different way, and it had expected … Read more
Government Response
The government has commissioned a data quality assessment of Self-Assessment data held on legacy systems by specialist companies, providing technical assurance for the significant and complex task of moving taxpayer records.
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29 Conclusion Accepted
Eightieth Report - Progress with M…
HMRC's restrictions hinder software industry's ability to develop products for Making Tax Digital.
We heard from HMRC and written submissions from the programme’s stakeholders, including those from the software industry, that a key requirement for the success of the programme was for HMRC to work effectively with the software industry.69 Software providers told … Read more
Government Response
The government agrees with the conclusion, stating it has already implemented a response by detailing existing end-to-end service guides for software developers that are continuously reviewed. HMRC is also reviewing minimum functionality standards to foster innovation and adapts its approach based on stakeholder feedback.
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30 Conclusion Acknowledged
Eightieth Report - Progress with M…
Repeated delays to Making Tax Digital programme undermine software provider confidence and investment
We asked the Department if it accepted that the changing timeline of the programme undermined those who were developing a business around the requirements of the programme. HMRC recognised that the repeated delays to the programme’s delivery had been unwelcome … Read more
Government Response
The government agrees with the conclusion, recognising the importance of certainty for MTD delivery partners and customers. It highlights the December 2022 announcement of the phased MTD for ITSA timeline, ongoing detailed planning and roadmap sharing, and continued engagement on communication plans, with further messaging planned for April 2026.
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31 Conclusion Acknowledged
Eightieth Report - Progress with M…
HMRC concern over MTD delays limiting software providers and creating taxpayer barriers
We asked HMRC if it was concerned repeated delays would limit the number of software providers willing to develop products for taxpayers, and whether this could create a barrier for taxpayers using the programme. It told us it was worried … Read more
Government Response
The government agrees with the conclusion, acknowledging the need for certainty and assurance for MTD delivery partners and customers. It outlines the December 2022 announcement of the phased MTD for ITSA timeline, ongoing detailed planning and roadmap sharing, and continuous stakeholder engagement on communication plans, with a focus on preparing for April 2026.
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32 Conclusion Accepted
Eightieth Report - Progress with M…
Quality issues and excessive choice plague HMRC's Making Tax Digital software listings
HMRC told us that it accredits Making Tax Digital software products so that someone selecting that product knows it has been tested against HMRC systems and if they use it correctly it will successfully submit their information. It also provides … Read more
Government Response
The government agrees with the conclusion, clarifying that HMRC operates a 'production approvals process' rather than accreditation for software, based on API specifications and testing. It states approved MTD for ITSA software will be listed on a Software Choices webpage and details existing processes for investigating errors, addressing customer impacts, and removing problematic software.
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33 Conclusion Acknowledged
Eightieth Report - Progress with M…
HMRC needs robust plan to communicate Making Tax Digital changes to taxpayers
As well as having significant parts left to design and test and have the software development industry buy into and build products, HMRC also needs to plan how it will communicate these changes to its customers. HMRC told us that … Read more
Government Response
The government agrees with the conclusion, recognising the importance of certainty in the MTD delivery plan. It outlines ongoing efforts, including sharing detailed plans and a roadmap with partners, seeking feedback on communication plans, and short-term focus on beta testing, with additional messaging planned closer to April 2026.
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Government Response AI assessment · 33 of 0 classified
Accepted 16
Acknowledged 3
Not Addressed 1
Rejected 13
Total 0 recs + 33 conclusions
Correspondence 1 letter
3 Jul 2023 Correspondence from Jim Harra, Permanent Secretary and Chief Executive, HM Revenue and Customs to PAC Chair Dame Meg Hillier – re Tax-deductibility of business costs incurred in Making Tax Digital for Income Tax Self-Assessment, dated 29 June 2023
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