Value Added Tax: Why Labour should use Making Tax Digital to drive SME productivity

How existing government policy on tax can support Labour's missions.

Making Tax Digital (MTD) is a government scheme, initially annouced in 2015, which requires businesses and individuals to keep digital records and use compliant software to submit quarterly tax returns. 

It’s goal is to reduce the tax gap by making it easier for businesses to get their taxes right. It should also have helped to boost UK productivity by driving adoption of digital tools. 

Unfortunately for the UK economy, many of the major deadlines of the scheme have slipped, with the rollout of MTD for self assessment/income tax and corporation tax now falling in the next parliament. 

Should Labour take office after the next election the party will inherit the responsibility for the agenda. In this paper we argue that it should seize this opportunity.

More than that, it needs to make sure potential benefits which were never conceived of in 2015 can become a reality. The new data that will become available through MTD can help tackle late payments, help SMEs grasp A.I, and bring them into green supply chains.

We are grateful to Intuit for supporting this research.