The Chartered Institute of Taxation (CIOT) has welcomed the announcement in yesterday’s Budget that the Government will publish an evaluation of the introduction of Making Tax Digital (MTD) for VAT.

The Institute also indicated it would welcome related research with the proposed evaluation, with the implication that this would be done before rolling out MTD to other taxes.

The CIOT highlighted the results of a recent survey of businesses and their advisers – conducted by the CIOT and the Association of Taxation Technicians – which led the Institute in January to call for a comprehensive review of MTD for VAT ahead of HMRC taking the decision to pursue plans to roll out digital reporting obligations more widely.

The survey results revealed that nearly 90% of respondents suggested MTD for VAT had not reduced errors, the costs of MTD compliance had far exceeded Government estimates, and that just 14% of respondents said there had been an increase in productivity in their organisation as a result of MTD for VAT.

Head of the CIOT technical team, Richard Wild, commented: “This is a sensible decision by the Government. Our view, which is supported by the results of our survey, is that the MTD project is far from achieving its goals and has proven more difficult to implement than the Government expected.

“Whilst compliance rates have been high, this has come with significant costs for business and their agents, and there are still a large number of taxpayers who have yet to become compliant with MTD for VAT.

“A much greater number of taxpayers will be affected by MTD for Income Tax compared to the number affected by MTD for VAT. Many of them will be less digitally capable than VAT registered businesses and will find it more difficult to cope, so it is vital that MTD for VAT is working smoothly before it is rolled out any further.”

Head of the CIOT’s Low Incomes Tax Reform Group (LITRG), Victoria Todd, added: “LITRG welcomes this announcement of an evaluation. There are still significant numbers of taxpayers who are yet to take action, either to sign up or to claim exemption, many of whom will be unrepresented.

“HMRC needs to do much more to support these groups. MTD for VAT must be working for everyone before moving on to income tax measures.”

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