In this week’s Enews, we look at HMRC’s research into the economic benefits of Making Tax Digital (MTD). There is also news on the Employment Rights Bill and the latest data on private sector activity to update you on.

• Financial benefit of MTD could be as high as £915 million
• Employment Rights amendments do little to address employer concerns
• Private sector activity expected to fall

The financial benefits of MTD for VAT could be as high as £915 million, according to analysis carried out by HMRC.

Since April 2022 all VAT-registered businesses should be using MTD compatible software to keep digital records and submit returns.

HMRC used responses from a survey with businesses in MTD for VAT using fully functional software to estimate the average time savings businesses have made.

The results showed that, on average, businesses have saved time on their ‘business’ finances and record keeping’ compared to time spent before MTD. Across all VAT businesses using fully compatible software, the time saved is estimated to be between 26 hours and 40 hours per business per year.

HMRC said that if this was extrapolated to the population, it estimated a time saving of between 32 million hours and 49 million hours in the 2022/23 tax year across all businesses in MTD for VAT.

The financial value of this time is estimated to be between £603 million and £915 million.

HMRC said:

‘The results of our analysis provide strong evidence that Making Tax Digital is having a positive impact for businesses. The findings complement other published estimates of the administrative burden of Making Tax Digital and demonstrate a wider economic benefit, beyond any requirement to meet tax obligations.’

Internet link: GOV.UK

The government’s proposed amendments to the Employment Rights Bill will do little to alleviate employer concerns, warns the Institute of Directors (IoD).

Changes to a number of proposals, including application of zero-hours contracts to agency workers and Statutory Sick Pay, have been announced.

In February, the IoD set out four key changes to the Employment Rights Bill which would significantly soften the negative impact of the reforms on hiring.

This included delaying protection against unfair dismissal so that they only come into effect after six months rather than on day one and increasing the planned reference period for the entitlement to guaranteed hours to 52 weeks.

Alexandra Hall-Chen, Principal Policy Advisor for Employment at the IoD, said:

‘While any steps to mitigate the impact of the government’s employment reforms on businesses are welcome, the changes announced today do not address the key areas of the reforms which are of particular concern to employers.

‘Substantial further amendments to the Bill will be required if it is to avoid undermining the government’s growth mission. Our own data shows that directors’ headcount expectations have dropped to lows last seen in the depths of the Covid-19 pandemic. Urgent and substantive action from government is needed to restore business confidence in hiring.’

Internet link: IoD website | GOV.UK

Activity in the private sector is expected to fall for the fourth consecutive quarter, according to a Growth Indicator from the Confederation of British Industry (CBI).

Business volumes in the services sector are expected to decline to -23%, and distribution sales are anticipated to fall significantly in the three months to May.

Private sector activity fell again in the three months to February at a faster pace than the quarter to January.

However, manufacturers expect output to return to growth.

Alpesh Paleja, Deputy Chief Economist at the CBI, said:

‘There are some glimmers of hope in our latest surveys. Growth expectations have become marginally less negative, driven by a predicted return to growth in the manufacturing sector. But overall, the data still paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly.

‘We do expect some tailwinds to growth over the year ahead. Rising real incomes will hopefully give households more confidence to spend, giving some relief to the sectors suffering the most.’

Internet link: CBI website