MTD for VAT brings in up to an extra £195 million in tax
Recent research regarding Making Tax Digital (MTD), appears to have significantly reduced tax return errors in its first year of running. Making Tax Digital was first introduced by HMRC in 2019, with the aim to involve small businesses in completing digital tax returns, and to eventually go paper-free across the board.
According to the research, conducted by HMRC, it has been estimated that up to £195 million in extra tax revenue has been collected via Making Tax Digital for VAT (MTD for VAT).
The research, peer reviewed by independent academics, showed that in 2019/20 the estimated additional tax revenue was between £185 million to £195 million, compared to a previous estimate of £115 million. HMRC stated that the additional revenue was due to the reduction in error on tax returns.
The research also revealed that, for businesses below the £85,000 turnover threshold, the estimated additional tax revenue that is collected is £19 per business per quarter, which is a 2.2% increase from the average liability estimates for businesses not signed up to MTD. For businesses above the threshold, the estimate of the average additional tax revenue is £57 per business per quarter and is a 0.9% increase.
Samantha Bennett, Accountant for Harvey Telford & Bates, said: ‘The outcomes of this research suggests that Making Tax Digital has successfully reduced the amount of errors typically seen on tax returns. This positive change will help businesses to reduce time spent on tax returns and refocus their energy on other tasks.”
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