Making Tax Digital proposals could cost businesses £3k a year

The government’s controversial Making Tax Digital proposals will cost businesses an average of £2,770 a year.

This is according to the Federation of Small Businesses, who looked at the impact of HMRC’s plans for firms to complete tax returns quarterly, rather than annually.

The FSB looked at the staffing costs involved in completing the extra returns. They say businesses will spend three times as long on their reporting obligations if Making Tax Digital is introduced.

Costs could rise

But they warns the figure could be even higher, as their research didn’t include factors like installing new software and training staff to use it, or IT support.

The FSB’s figures a wildly different from the estimates put forward by the government. HMRC has previously said that it believes the changes will cost businesses an average of just £280.

The Revenue expects the transitional cost to be minimal for larger businesses. In a consultation document explaining its calculation, it said: “HMRC believes that VAT-registered, medium sized and large businesses are very likely to already have good or adequate IT hardware. If anything urgent is required, this may only require a minor upgrade.”

Call for pilot

Conservative MP Andrew Tyrie, chairman of the Treasury select committee, has pushed the government for an independent assessment of both HMRC and the FSB’s figures.

In a statement yesterday, Tyrie said: “There are huge differences between the FSB and HMRC about the administrative burden of Making Tax Digital.

“This is the heart of the matter. The FSB think that businesses might spend three times as much on their tax obligations as they currently do. HMRC think they will spend less time, leading to a small net saving. A comprehensive pilot should shed some light on which assumption is closer to reality.”

Who do you believe? Let us know in the comments.

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