Thursday 09 February 2017 12:01 am

Treasury Select Committee chair slams dodgy maths on costs of scrapping the yearly tax return

The chair of the influential Treasury Select Committee today questioned the figures which have been produced so far for the cost to businesses of HM Revenue and Customs' (HMRC) Making Tax Digital project.

The taxman's landmark initiative, which will see people update HMRC on their financial details throughout the year rather than filling out a yearly return, is due to be up and running by 2020.

The Treasury has previously estimated the new plans will set businesses back £280 each, but the Federation of Small Businesses (FSB) pegs the price at nearly 10 times that amount at £2,770.

"The compliance cost estimates are so far apart that at least one of them must be wrong," said Andrew Tyrie. "I have written to both the Treasury and the FSB to ask for detailed supporting methodology for their estimates.

"If the FSB are right, the effects of Making Tax Digital would be crippling for many small businesses. If the government are right, businesses have something to gain in the longer term and one would expect them to be queuing up to join the pilot."

Mike Cherry, national chairman at the FSB, said: "Subsequent analysis from some other organisations has been broadly in line with our figure of £2,770. Our independent research and methodology which led to that figure was robust."

A Treasury spokesperson said: "We are confident in our figures. The methodology we used is comprehensive and has been rigorously reviewed by external stakeholders. For transparency, we published this methodology online last month."

The Treasury Select Committee has already had one shot at the Making Tax Digital project, which is forecast to save the taxman £8bn a year. In a report last month, the Committee warned the government it needed to approach the cost concerns businesses had with care and balance them against the savings for the Exchequer.