An estimated £195m extra tax revenue has been brought in through businesses using Making Tax Digital (MTD) for VAT reveals research from HMRC
The research, conducted by HMRC shows that in 2019-20 the estimated additional tax revenue is between £185m to £195m compared to a previous estimate of £115m.
The tax authority stated that the additional revenue was due to the reduction in error on tax returns.
The research revealed that for businesses below the £85,000 turnover threshold, the estimated additional tax revenue that is collected is £19 per business per quarter.
For businesses above the threshold, the estimate of the average additional tax revenue is £57 per business per quarter.
A typical cloud-based accounting package (which is a requirement of MTD) is about £78 per quarter. For many small businesses, the cost of being forced to use cloud-based accounting far outweighs the extra VAT collected.
Announced in July 2020, Making Tax Digital for VAT becomes mandatory for all VAT registered businesses from 1 April this year regardless of turnover.