Making Tax Digital 'to cost £2,800 per business'

An independent analysis of how much reporting to the taxman “at least quarterly” will cost the average business has come back with a figure three times greater than the government’s.

Commissioned by a small business group, the Centre for Economics and Business Research found that the quarterly reporting regime will cost £2,770 per business, not the £280 officially estimated.

Although the actual cost to individual businesses will “vary considerably” depending on the final shape of the regime, the group behind the CEBR’s calculation hinted that it was conservative.

In fact, the Federation of Small Businesses said the figure factored in that HMRC’s “literature makes a point of the simplification of the digital process,” prompting the centre to assume a “decrease [in] the time spent on the reporting.”

Produced at the end of last month, the CEBR’s calculation has not gone unnoticed by the Treasury Select Committee, which seized on the “huge differences” between the industry’s projection and the government’s.

“The FSB think that with MTD, businesses might spend three times as much time on their tax obligations as they currently do. This could cost them around £3,000 a year in time, salaries and accountants' fees,” said committee chair Andrew Tyrie MP.

“HMRC think that they will spend less time, leading to a small net saving. A comprehensive pilot should shed some light on which assumption is closer to reality.”

Mr Tyrie added that in light of the discrepancy, which he said underlined the need for a pilot,” he has written to the Administrative Burdens Advisory Board, asking them to investigate the true cost.

Already a critic of Making Tax Digital (the scheme to implement the quarterly reporting), the board consists of business owners and advisers, whose job it is to make tax via HMRC “easier, quicker and simpler.”

But some tax professionals think the Revenue’s figures simply don’t stack up, and that even its own officials know it.

“In a recent seminar with HMRC…the spokesman admitted that the £280 figure put forward by them was based on pretty thin data,” reflected Tim Mallon, a director at accountancy firm Leathers LLP.

“MTD is seen as a way of closing the ‘£8bn tax gap’ as the five million businesses involved will provide more accurate figures. If my maths is right, that's about £1,600 per business which is I suspect [is going to be] the cost of implementation for most of them.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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