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Most firms not benefitting from MTD for VAT

29th January 2020

Making Tax Digital (MTD) has created additional, costly obligations for most VAT-registered businesses, according to a report.

MTD for VAT kicked in on 1 April 2019 for UK businesses with an annual taxable turnover of more than £85,000.

The government indicated that the scheme had been a success, with 94% of firms meeting their new obligations in the first two quarters of 2019/20.

But new research from two major tax groups claimed the rollout has been far from plain sailing for 1,091 businesses and agents handling the transition.

The Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) conducted the study late last year.

They found MTD for VAT has had little impact on reducing errors for 70% of respondents, and most remaining responses even said errors increased.

Just 14% of those polled said MTD for VAT had improved productivity in their businesses, while compliance costs far exceeded government forecasts.

Tina Riches, chair of the joint-CIOT and ATT digitalisation committee, said:

"Far from bringing benefits to businesses and the Exchequer, MTD for VAT has so far created additional, costly obligations for most businesses beyond what was predicted by HMRC.

"There is a very long way to go to achieve the benefits claimed by the Government about MTD for VAT.

"The Government should undertake a detailed review of MTD for VAT, and determine any benefits, before rolling out MTD more widely."

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