MTD for VAT brings in an extra £195 million in tax

21 Mar 2022

An estimated £195 million extra tax revenue has been collected via Making Tax Digital for VAT (MTD for VAT), according to research from HMRC.

The research, conducted by HMRC and peer reviewed by independent academics, showed that in 2019/20 the estimated additional tax revenue was between £185 million to £195 million, compared to a previous estimate of £115 million.

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, which is a 2.2% increase from the average liability estimates for businesses not signed up to MTD.

For businesses above the threshold, the estimate of the average additional tax revenue is £57 per business per quarter and is a 0.9% increase.

Lucy Frazer, Financial Secretary to the Treasury, said: 'This research provides peer reviewed evidence that Making Tax Digital is likely already achieving what it was intended to do – cutting out error. This will help cut down the amount of time businesses spend on their tax affairs, freeing up more time for them to do what they care most about – being productive and growing.'