It has been estimated that the new MTD inititaive will cost firms £37 million a year and will have no cost saving effect, reveals HMRC.
MTD is the digital redesign of the tax system, which means that most VAT-Registered companies will need to keep digital records of VAT and submit their returns digitally also. This programme was proposed by former Chancellor George Osborne and was suggested to ‘modernise’ tax returns. But it has been revealed that it may end up costing more than it saves.
The original proposal was estimated to save businesses £100 million a year from 2021. But HMRC’s latest estimation is that there will be no savings but instead will cost firms £37 million per annum, they predict that transition will cost less, but the ongoing costs will outweigh the ongoing savings, these new estimations come from the changes made to the programme last year which include a slower rollout.
One major change is that now only business with a turnover of £85,000 have to file digitally, and those business lower than that are excempt.
Though a spokesperson from HMRC have said that the costs incurred by businesses are likely to qualify for full tax relief, which is not reflected in these estimates. This is yet to be definitively announced and therefore we cannot be sure if this will come into effect.