Concerns raised over sample size for making tax digital for income tax
25 January 2022
HMRC has confirmed that only nine people are taking part in a pilot scheme for its new digital tax system, revealing the number of people currently testing the new reporting arrangement is only a small fraction of those who have volunteered to do so since the trial first started in 2017.
The current number of participants brings into question the parameters HMRC has set for eligibility for the pilot scheme and its process for selecting taxpayers to test making tax digital (MTD) for income tax software, which 4.3 million people will be relying on when it becomes mandatory for those with in-scope business activities from 6 April 2024.
HMRC has advised that the current low number of participants reflects a planned approach towards pilot testing at this stage, ensuring the first taxpayers to adopt MTD for income tax receive additional support before opening up the scheme to more participants. However, HMRC has not disclosed exactly how it approached the process of determining the size of its testing population, and then how it chose those invited to participate.
Considering HMRC’s enhanced focus on digital, including changes to reporting under MTD for all VAT-registered businesses from 1 April this year, the new software to help individuals and businesses with their tax needs to be easy to access, effective and efficient. Given the tax authority’s ambitions to ‘become one of the most digitally advanced tax administrations in the world’, in our view HMRC must increase the number of people taking part in the pilot scheme sooner rather than later to ensure these objectives can be met.
The current number of participants brings into question the parameters HMRC has set for eligibility for the pilot scheme and its process for selecting taxpayers to test making tax digital (MTD) for income tax software, which 4.3 million people will be relying on when it becomes mandatory for those with in-scope business activities from 6 April 2024.
HMRC has advised that the current low number of participants reflects a planned approach towards pilot testing at this stage, ensuring the first taxpayers to adopt MTD for income tax receive additional support before opening up the scheme to more participants. However, HMRC has not disclosed exactly how it approached the process of determining the size of its testing population, and then how it chose those invited to participate.
Considering HMRC’s enhanced focus on digital, including changes to reporting under MTD for all VAT-registered businesses from 1 April this year, the new software to help individuals and businesses with their tax needs to be easy to access, effective and efficient. Given the tax authority’s ambitions to ‘become one of the most digitally advanced tax administrations in the world’, in our view HMRC must increase the number of people taking part in the pilot scheme sooner rather than later to ensure these objectives can be met.
