The head of HMRC, Jim Harra, has told MPs that the tax authority “underestimated” the scale and complexity of Making Tax Digital (MTD).
In a meeting on Monday, members of the Public Accounts Committee (PAC) asked HMRC representatives to explain continual delays to MTD for income tax self-assessment (MTD for ITSA).
According to Harra, HMRC announced the scheme “without perhaps doing all the necessary work to identify the complexity in migrating data from [HMRC’s] old systems”.
The quality of the data meant it was not just a matter of migrating it, Harra continued, which ultimately “distracted” HMRC from the next phase of MTD.
MPs also questioned HMRC officials about the MTD for ITSA pilot, which has been deferred until 2026 after just 15 taxpayers passed its eligibility criteria.
Jo Rowland, director general of transformation at HMRC, said that beginning the pilot with small numbers was always the plan, as it allowed the tax authority to make “detailed evaluations” of the systems and customer experience.
HMRC projections show that MTD is set to raise an additional £3.9bn in tax by 2034. However, a recent National Audit Office report estimated that the scheme will cost the taxpayer around £1.5bn following eight years of delays.
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