HMRC underestimating the cost of Making Tax Digital for SMEs, says NAO

HM Revenue & Customs (HMRC) is failing to fully estimate how much it could cost Small and Medium enterprises (SMEs) to convert to Making Tax Digital (MTD), according to new criticisms.

The National Audit Office (NAO) has said that although the Government’s approach to MTD transformation is ‘credible’, HMRC must do more to increase public confidence in the online services currently being developed – and to inform SMEs of what they need to do in order to comply.

According to the NAO, HMRC needs to remain optimistic and committed to meeting its goals, but veer away from over-ambition – which the NAO believes is a recipe for failure.

An NAO report read: “HMRC was over-optimistic about how much change it could deliver all at once, and how fast it could reduce demand for telephone contact in particular. This resulted in a collapse of its service to personal taxpayers in 2014/15 and the first half of 2015/16.

“HMRC has since recovered the quality of its service to personal taxpayers by recruiting more staff and has adjusted its future resource plans in the light of this experience.

“In the past year HMRC has made plans to invest more than £2bn on its transformation in the next five years,” the report added.

“HMRC has launched digital accounts for individuals; announced plans to close 137 offices and the location of 13 new regional hubs; and secured agreement for its plans to replace its IT services contract, Aspire, which it has revised to reduce the risk of carrying out too much change too quickly.”

The NAO reminded SMEs that: “Most business customers will be required to update HMRC quarterly rather than annually about their tax affairs, and some may need to purchase new software that works with the new systems.”

SMEs concerned about how the switchover will affect them are urged to contact tax experts for advice.