HMRC's digital initiative is estimated to cost taxpayers and businesses over £1 billion.
The UK's digital tax scheme, Making Tax Digital, is facing significant delays and cost overruns, causing concerns. The programme, aimed at modernizing tax processes, is now three years behind schedule and over £1 billion over budget, according to the National Audit Office (NAO).
Originally set for completion in 2020, the NAO found the timeline unrealistic, with the project's cost now estimated at £1.3 billion, much higher than the initial budget of £226 million. Making Tax Digital has been plagued by delays, having transferred only 3.2 million tax records to the new system out of 14 million.
Complexities in implementing the self-assessment component, along with Brexit and COVID-19 resource demands, contributed to setbacks. The NAO criticized the repeated delays, which have undermined the programme's credibility and increased costs.
Moreover, the NAO revealed that HM Revenue and Customs (HMRC) did not mention the £1.5 billion burden on businesses in its 2022 business case. This entails costs for altering tax planning, updating software, and seeking professional advice.
Despite the challenges, HMRC believes digitalizing taxes will increase revenue by £3.9 billion by 2033, reducing errors and enabling accurate reporting. The tax office aims to implement the digital tax regime for self-assessment by 2027, but the plan remains highly challenging, cautioned the review body.
Under the new system, larger businesses must provide quarterly updates to HMRC, facing penalties for non-compliance. Critics argue that HMRC underestimated the work and costs involved, burdening self-assessment taxpayers.
As part of its measures, HMRC recently announced a temporary closure of its self-assessment helpline for three months. Concerns about customer service quality have been raised, with accountants describing it as a "cry for help." Taxpayers will be directed to online resources and digital assistants for support.
While acknowledging the challenges, HMRC emphasizes the efficiency and effectiveness of the digital tax system, promising a strong return on investment for taxpayers. The organization maintains transparency regarding costs for businesses and remains committed to providing free software for straightforward tax affairs.
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