Making Tax Digital

Lord Forsyth of Drumlean Excerpts

Wednesday 17th September 2025 Lords Chamber

[Lord Livermore (Lab)]

It is not for me to comment on the tax affairs of any one individual.

[Lord Forsyth of Drumlean (Con)]

Does the Minister recall his time on the Economic Affairs Committee and the report which was produced—I am not sure whether he was still on the committee at that time—on Making Tax Digital? It welcomed the move but thought it was important to take account of the burdens placed on small businesses and the costs that were involved. Surely at a time when the economy is, shall we say, not exactly performing as he might hope, might it not be better to look at this again, with a view to the levels of fines and the speed with which it is being implemented? There was considerable evidence then that HMRC was simply contracting out its job of collecting taxes to people who were trying to run businesses in difficult times. Surely that is not acceptable.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I of course remember my time on the Economic Affairs Committee, and I was privileged to serve when he was the chair of that committee. We produced many high-quality reports. I do not think I was on the committee at the time of the report that the noble Lord refers to, but I fully appreciate that there are costs to business of doing this—I think the recurring cost is estimated to be, on average, £110 annually. It is important to say that HMRC has worked with industry to ensure that a range of software is available, including free and low-cost software, and of course those costs do not take into account the benefits. There are important productivity and time-saving benefits.

As regards Making Tax Digital for VAT, HMRC has carried out a detailed evaluation of the impact of that, which shows that two-thirds of businesses report time-saving benefits. Of businesses that were using digital accounting software for the first time, 80% reported significant benefits, a quarter reported improved productivity and one-third had used Making Tax Digital software for other business processes. At a time when productivity is such a challenge—an issue that we frequently discuss in this House—and when small businesses make up such a large part of the economy, if we can see two-thirds of small businesses making significant productivity gains, that is a benefit worth having.