The Impact of Making Tax Digital (MTD) on Small Business Compliance and an Evaluation of HMRC’s Digital Reform Strategy
Description
Findings show that MTD has halved compliance error rates and improved timely filing. However, micro and small enterprises bear disproportionate financial costs and administrative pressures. Software expenses average £800 annually, with higher costs for manufacturing and tech sectors, and administrative time commitments exceed 25 hours monthly for many SMEs. Correlation analysis indicates that higher turnover firms adapt more easily, while smaller businesses face increased penalties and lower satisfaction.
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Steps to reproduce
Tax administration in the twenty first century is undergoing a radical transformation driven by the imperatives of digitalization, transparency, and efficiency. The UK’s Making Tax Digital (MTD) initiative, launched in 2019, is a flagship reform designed to modernize the country’s tax system. By 2025, MTD compliance has become mandatory for most VAT registered businesses, with extensions underway for income tax and corporation tax.
Institutions
- North South University