MPs on the Public Accounts Committee have urged HM Revenue and Customs to "reconsider" its response to several concerns about Making Tax Digital – saying the department has failed to convince them it has addressed flaws in the flagship programme.
In a letter to permanent secretary Jim Harra, PAC chair Dame Meg Hillier asked for "further information" on how HMRC would address issues highlighted in the commitee's November report on the progress of MTD.
In the report, MPs expressed concern about the oversight of the project, which began in 2015 and has been subject to a series of delays.
They urged HMRC to explain how it planned to hold senior leaders accountable for delivering against the programme’s timetable and budget, and any consequences for further timetable and budget overruns.
Responding via a Treasury minute in February, HMRC said it agreed with the recommendation and set out a series of existing measures to hold officials accountable – including the Government Major Projects Portfolio’s “robust governance processes” and the delivery of MTD being “reflected in the performance objectives” of several senior officials.
But Hillier’s letter urged Harra sec to go further and set out “what are you doing differently to ensure these processes will work more effectively than they have so far”.
“Whilst your response outlines the governance and accountability processes in place, these existed before the committee heard from you in 2023. These have not proved sufficient to date,” she said.
PAC’s report called for a “robust assessment” by summer of how much difference more frequent submissions of self-assessment data, and digital submissions, will make to tax revenue.
Rejecting the recommendation, HMRC said is was “not possible to estimate robustly the effects of the separate components [of MTD] in isolation”.
But in her response, Hillier said that assessing the additional revenue from increasing digital record-keeping for self-assessment taxpayers was “fundamental to the programme’s business case justification”.
“You have not attempted to demonstrate consideration of further robust testing of the financial information underpinning your programme, for example, controlled behavioural experiments to ascertain the difference that more regular filing can make to the accuracy of returns. VAT returns were already provided quarterly and cannot provide this assurance,” she said.
Hillier also said PAC was unsatisfied with how HMRC had addressed concerns about how it will ensure the quality of tax software developed by external companies.
In the November report, the MPs said they were concerned that the “repeated delays and poor design” of the self-assessment phase of MTD were “deterring software providers from developing quality products and will ultimately put customers at risk”.
There were more than 500 software products available for Making Tax Digital for VAT at the time, which could make it difficult for people to make an informed choice about what to use and for HMRC to conduct timely reviews of the products' quality, they said.
HMRC agreed to provide PAC with an explanation of how it would “ensure that it strikes the right balance between ensuring competition, quality and access to software for its Making Tax Digital VAT and self-assessment customers”, as well as what assurance customers can take from its accreditation of software and how it will protect taxpayers if the software makes mistakes in tax submissions or fails to protect their data.
But again, the information provided in the Treasury minute described measures already in place.
“Your minimum functionality standard for software products is still out of date, which gives little confidence that you have listened to our concerns on this matter,” Hillier said.
She said that while the tax agency has committed to ending the requirement for taxpayers to submit an "end of period" declaration and statement, this is still included as a requirement in a list of minimum-functionality standards on HMRC’s website for tax software and app developers.
And she said the website includes links to “a number of unusable software options”, including one that says it is still “under construction” and another that does not provide information in English.
“I would like you to set out how you will ensure the quality and timeliness of these pages going forward and ensure taxpayers are not directed to sub-standard products,” she said.