Research latest: MTD could yield almost £1 billion of annual time savings for UK businesses.
New research suggests that HMRC’s Making Tax Digital initiative has streamlined business tax processes, potentially saving up to forty-nine million hours across the UK.
Users of Unit4 Financials by Coda are ideally placed to take advantage of this efficiency saving. Equipped with MVAT, a fully MTD-compliant solution integrated into your existing financial management software, you are all set to simplify your workflows for VAT and all future MTD compliance obligations.
MTD promised a lighter tax workload. Has it happened?
When the government unveiled its Making Tax Digital (MTD) project a decade ago, one of the stated aims was to make tax processes more efficient for businesses. This would reduce the need for manual data entry and calculations, lower the risk of error, and simplify the tax submission procedure.
As a rule, promises made by the taxman to make life easier are always going to be met with a certain degree of scepticism. So, three years after mandatory MDT compliance for VAT, has it made any difference?
To find out, HMRC commissioned the independent research agency, Kantar Public (now Verian), to establish the impact of MTD on businesses using fully functional Making Tax Digital compatible software. Published on 27 February 2025, the research covers the first full tax year of mandatory VAT compliance (2022-2023) and is based on a survey of 2,300 businesses. The full findings are available here.
Key findings
- Thirty percent of businesses say they get more done per hour when managing their finances and record keeping, compared to before the introduction of MDT.
- On average, there has been a 4.3% decrease in time spent on finances and record keeping since the introduction of MDT.
- For the 2022 to 2023 tax year, an estimated total of between thirty-two million and forty-nine million hours were saved by all UK businesses using fully functional software.
- The estimated total value of time saved by all businesses was between £603 million and £915 million.
- Of those businesses that had saved time through MTD, 66% said they had used that extra time to increase productivity at work.
Efficiency savings are not automatic: they depend on the underlying software.
HMRC allows businesses to have multiple systems in play regarding VAT, so long as they use bridging software to facilitate a digital link between data stored in spreadsheets and HMRC’s portal. Some businesses, particularly those with legacy systems, use digital links to avoid overhauling their record-keeping methods.
It is important to note that only businesses using fully functional MTD-compatible software were included in the survey results, i.e., those companies still using bridging software were discounted. On its own, bridging software does not fulfil other core MTD requirements (e.g., maintaining digital records and ensuring digital links between data).
Meeting the minimum MTD compliance requirements does not, in itself, lead to efficiency savings. If you are still using a combination of spreadsheets with digital links, you must ensure that VAT data is correctly formatted and imported into the bridging software before submission. Errors in formulas or data formatting can still lead to compliance issues, and care needs to be taken to ensure that spreadsheets are appropriately structured and that digital links between records are maintained.
MTD software for Unit4 Financials by Coda: full functionality equals maximum efficiency.
In the run-up to MDT VAT submissions becoming mandatory, many businesses were keen to reach a state of compliance in as short a time as possible. For many, setting up digital links was the obvious answer as a kind of stopgap workaround.
But if a temporary solution becomes a permanent fixture, you will still have to grapple with a less-than-ideal workflow. You are compliant but failing to realise the efficiency savings that MDT was designed to deliver.
Ideally, the software you use should help you achieve several things:
- As a minimum, it needs to be compliant with HMRC’s mandatory requirements (capable of digitally storing all records, automatically calculating VAT, and submitting them directly to HMRC)
- It should be easy to use, both in terms of a straightforward, easy-to-navigate interface, and in terms of not requiring users to jump between different applications for different tasks.
- VAT reporting should sit seamlessly alongside other linked activities (e.g. bank reconciliation, invoice tracking, and tax forecasting), in a single solution.
- Ideally, it should be easy to implement and cost-effective; in other words, deploying it should not be a major disruptive project.
- With an eye on the future, it should also provide a framework to help you comply with other MTD initiatives that are likely to be with us soon (MTD for Corporation Tax, for instance)
Thanks to MVAT from Millennium Consulting, Unit4 Financials by Coda users are ideally placed to tap into these benefits. MVAT is a HMRC-recognised, MTD solution built by Coda experts specifically for Unit4 users. Quick and easy to implement, you can do everything in one place: run your VAT reports, import summaries, drill into individual transactions, submit returns to HMRC, and more. The result? You are all set to realise the efficiency and productivity improvements that MTD was designed to deliver.