Background to the report

HMRC launched its flagship transformation programme Making Tax Digital (MTD) in 2015-16. The programme’s aims were to maximise tax revenue, make sustainable cost savings and improve customer service by modernising HMRC’s systems for three business taxes – VAT, Income Tax Self Assessment (Self Assessment) and Corporation Tax. To achieve these objectives, HMRC intended to move its tax systems and tax records onto a modern tax management platform by 2020.

Jump to downloads

HMRC also planned to require business taxpayers to keep and submit quarterly digital tax records. This was to reduce the amount of tax lost from taxpayers making avoidable or careless errors; help businesses better understand their tax position; and reduce the burden of submitting tax returns.

In 2018 we reported that changes in MTD’s scope and delays had deferred the benefits for HMRC, and that overall it expected MTD to cost rather than benefit business taxpayers. Our 2021 report, The challenges in implementing digital change highlighted common problems that departments encounter including:

  • having unrealistic ambition and timescales, with unknown levels of risk
  • not engaging adequately with commercial partners
  • underestimating the complexity involved in moving from legacy systems

Tackling legacy systems is costly and complex, but continuing to use them is risky and leaves government facing greater costs and risks in the future, including possible service disruption and cyber-attacks.

Scope of the report

This report considers progress to implement Making Tax Digital, and whether HMRC’s latest plans provide confidence that the programme will deliver value for money. Specifically, the report looks at:

  • HMRC’s original vision, options and plans for MTD
  • HMRC’s progress between summer 2017 and the end of 2022
  • the realism of HMRC’s latest plans

This report focuses on the MTD programme from 2016 onwards. We do not assess wider changes within HMRC, but we do refer to them where they relate to MTD. Appendix One describes our audit approach and evidence base. Appendix Two shows planned implementation dates for digital record keeping by business taxpayers since 2015.


HMRC’s vision to digitalise the tax system has the potential to bring about a step-change in the system’s efficiency and effectiveness. The principle of digitalising tax has broad support among stakeholders provided it makes it easier to pay tax. HMRC launched digital record keeping for VAT for larger businesses on time, but it needed more time to move taxpayer records off legacy systems due to the extent of data issues it had to deal with.

HMRC’s initial timeframe for MTD was unrealistic. It did not allow sufficient time for HMRC to explore the full range of options that would achieve the programme’s aims and select one that it could implement.

Each announcement has set an ambitious timeframe for delivery, with several aspects of the MTD programme to be delivered in parallel. The repeated delays and rephasing of MTD has undermined its credibility and increased its costs. There is a risk that delivery partners and taxpayers disengage from a programme that can only succeed if those groups significantly change their behaviour. Higher costs were not inevitable, had HMRC taken more time to plan and consider the realism of the options.

HMRC has not demonstrated the programme offers the best value for money for digitalising the tax system, with later business cases significantly underplaying the total cost to customers of making the change. The programme should now develop a robust business case which includes a comprehensive and up-to-date assessment of the costs to customers of implementing MTD. Planning has been too high-level and the risk remains that further delays will add costs and defer benefits. HMRC is reviewing how MTD will work for businesses and landlords with lower Self Assessment income. It should take this opportunity to assess how far the programme is improving services, reducing burdens, and making the tax system easier to comply with and use lessons from this review to ensure the wider programme is finally on track to secure the benefits it has long promised.


Publication details

Press release

View press release (12 Jun 2023)

Latest reports