HM Revenue and Customs has said the rollout of Making Tax Digital has, despite parts of the programme being delayed or suspended, thus far generated £223m in extra tax revenues – a figure which the department believes will double within the next 12 months.
In an update published last week detailing HMRC's performance against long-term objectives, the department revealed that, as of the end of March 2020, its work to transform the tax system has delivered £108.5m in extra revenue from individuals over the last four years.
This extra money has correlated with rapid and steady growth in the number of citizens with online personal tax accounts, which has risen from 9.4 million three years ago, to its current tally of 22.6 million.
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With Making Tax Digital for VAT having come into effect at the beginning of 2019-20, last year marked the first time that the transformation programme also increased tax intake from businesses – bringing in an extra £115m.
HMRC claimed that the cumulative total of £223.5m in extra tax receipts generated so far by MTD is almost £30m more than its target of £195m. It indicated that it is ahead of schedule to deliver its target of £480m extra revenue by the end of 2020-21.
That target was, however, revised down in 2017 from an original plan of £920m set out in the 2015 spending review.
Indeed, the update acknowledged that HMRC has encountered a variety of “problems and challenges” over the last five years that have hampered its ability to deliver a number of “ambitious” transformation objectives.
“We haven’t achieved everything we wanted to yet,” it said. “There are a number of reasons for this. Some of our assumptions were over-ambitious, and our original plans pushed the limits of what we were able to do, in terms of technology and capacity, in the timeframe we wanted. Preparations for Brexit placed additional new demands on our project delivery capacity, and we simply didn’t have the resources to do everything we had planned.”
In 2017 and 2018, the department undertook “prioritisation exercises” that saw work on Making Tax Digital for Individuals – including “pre-population of data, simple assessment and further development on personal tax accounts” – stopped or paused, more or less across the board.
Various “non-critical elements of other programmes” were also put on hold, while the department’s Compliance for the Future Scheme was canned entirely.
Despite having scaled back its work in this way, in the last four years HMRC has still exceeded targets for recouping evaded or a tax and generating efficiency savings.
In each of the last four financial years, the department has beaten its target for the amount it aimed to bring in through compliance measures. This culminated in 2019-20 when so-called compliance yield reached £37bn, some £2.5bn ahead of the stipulated target.
Since the beginning of the 2017 fiscal year, compliance yield has totalled £130.3bn – almost £11bn more than expected.
Over the same period, HMRC has also achieved a tally of £1.93bn in ‘sustainable resource savings’, exceeding its target of £1.9bn.
This is despite missing the 2019-20 goal of £717m savings by £24m.
Savings were “achieved through both our business-as-usual activities and the transformation portfolio, which includes the digitisation of the tax collection system”, the department said.