The Public Accounts Committee (PAC) has challenged HMRC on the governance and accountability of the Making Tax Digital (MTD) initiative.

MPs in the PAC have called for HMRC to reconsider its response to the PAC's concerns regarding MTD. Writing to HMRC's Managing Director, Jim Harra, Meg Hillier, Chair of the PAC, requested additional information on how HMRC intends to address MTD issues highlighted in the PAC's report on the initiative, which was published in November 2023.

Ms Hillier called for HMRC to outline what it is doing differently to ensure MTD processes work more effectively than they have in the past. The PAC has also urged HMRC to carry out a 'robust assessment' of how frequent submissions of self assessment information and digital submissions will affect HMRC's tax revenue.

In the letter, Ms Hillier commented: 'You have not attempted to demonstrate consideration of further robust testing of the financial information underpinning your programme, for example, controlled behavioural experiments to ascertain the difference that more regular filing can make to the accuracy of returns. VAT returns were already provided quarterly and cannot provide this assurance.'

HMRC said that it intends to 'ensure that it strikes the right balance between ensuring competition, quality and access to software for its MTD for VAT and self-assessment customers'.

Accessing finance is becoming more difficult for a large number of small and medium-sized enterprises (SMEs), according to new data from the British Chambers of Commerce (BCC).

The BCC's latest survey of business conditions found that around half of businesses felt that getting funding had become more challenging over the past three years. By contrast, only 13% said it was getting easier.

The survey also reveals that 70% of firms – mainly SMEs – have not accessed finance from an external provider in the past 12 months.

Jonny Haseldine, Policy Manager at the BCC, said: 'As SMEs across the UK continue to deal with ongoing economic pressures, accessing crucial finance is really tough. For many SMEs it's a hurdle too large to even try and tackle.

'In evidence to the Treasury Select Committee last September, we called for urgent action to help SMEs seeking finance. We need to see measures to improve accessibility to finance, better awareness of alternative funding options and greater competition in banking options.

'SMEs are the backbone of the UK economy. Giving firms easier and more competitive access to finance is crucial to getting the economic growth we all want to see.' 

Think tank Localis has urged the government to reform Landfill Tax to help cut down on waste crime and illegal activity by organised gangs.

Localis argued that the gap between standard levels of Landfill Tax and lower levels has led to an escalation in waste crime, including fly tipping and illegal dumping.

It said that the costs of waste crime have 'burgeoned' by 55% since 2015 to around £1 billion a year. The think tank recommends introducing a tax band to bridge the gap between standard and lower Landfill Tax rates, 'reducing the incentive for misclassification of waste and promoting fairer taxation'.

Jonathan Werran, Chief Executive of Localis, said: 'Waste crime is toxic in that it despoils our natural environment, imposes costs on already cash-strapped councils and robs the Treasury of tax revenue.

'Any serious attempt at place-based reform must look to addressing the iniquities and imbalances of how we tax it and then move to rigorous enforcement and prosecution of organised gangs.'

A report by the Suffolk Chamber of Commerce has urged the government to urgently implement reforms to Research and Development (R&D) tax relief in order to avoid 'hurting small companies'.

The report found that recent changes by HMRC and a 'wild west' regulatory system in regard to who can act as R&D tax advisers are 'undermining confidence and take-up'.

The Chamber collected a number of case studies and original survey research, which showed that 46% of small companies are deterred from making future claims based on their latest experience.

Chair of the Chamber's R&D Tax Reliefs Task and Finish Group, Steve Elsom, said: 'Our original research into local businesses' experiences shows that the lack of knowledgeable experts at the HMRC, plus the imposition of an overly strict compliance regime is causing many legitimate companies' most recent claims to be delayed and/or refused, with others fearful that previously successful claims from previous years might now be challenged.

'Every right-thinking person applauds the crackdown in fraudulent claims, but HMRC appears to be going to extremes in its definition of the term.' 

An analysis by the House of Commons library has revealed that up to 1.6 million pensioners are expected to fall into the income tax net in the next four years.

According to the analysis, approximately 9.3 million pensioners will be paying income tax by 2028. 8.5 million pensioners currently pay income tax, but due to a freeze in the basic rate tax threshold, this number is set to increase.

Without this freeze, the threshold would have risen with prices to £15,220 in 2024 and to £15,990 in 2027/28. Research carried out by the Institute for Fiscal Studies (IFS) showed that more than 60% of over-65s pay income tax, up from 50% in 2010.

Commenting on the analysis, Baroness Altmann, member of the House of Lords, said: 'I do think it is worrying that so many more pensioners could be dragged into the tax net as the state pension may soon rise above the frozen threshold.

'Most of those tipped into tax will be poorer pensioners with little more than their state pension to live on. Most of them will be totally unaware of any liability and will never have filled in a tax return in their life. They are then at risk of being hit with fines and penalties for not paying a tiny amount of tax that they didn't even know about.'

Research carried out by Prism Solutions has suggested that UK small and medium-sized enterprises (SMEs) are bracing themselves for a 'tough few months' ahead.

Prism Solutions' survey of more than 500 SMEs found that over three quarters believe fiscal and political instability affected their business's profitability during 2023.

UK small firms desperately need a period of stability in order to expand, according to the research, but with an unsteady economy and uncertain policy, many businesses could be in for tumultuous months.

Commenting on the matter, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: 'The UK economy remains one of the most sophisticated globally, but it's difficult to see where further expansion will come from with high inflation, elevated interest rates, policy uncertainty, and barriers to EU trade all preventing many SMEs from making longer-term plans.' 

Up to eight million UK jobs are at risk from the rise of artificial intelligence (AI), according to a report by the Institute for Public Policy Research (IPPR).

The effects of generative AI are already being widely felt as 11% of tasks done by workers are currently exposed, said.

It said that back office, entry level and part-time jobs were at the highest risk of being disrupted during the so-called first wave, with women and young people the most likely to be affected as a result.

Carsten Jung, Senior Economist at the IPPR, said: 'Already existing generative AI could lead to big labour market disruption or it could hugely boost economic growth, either way it is set to be a game changer for millions of us.

'The question now is less whether AI can be useful, but rather how fast and in what manner employers will use it. History show that technological transition can be a boon if well managed or can end in disruption if left to unfold without controls. Indeed, some occupations could be hard hit by generative AI, starting with back-office jobs.

'But technology isn't destiny and a jobs apocalypse is not inevitable – government, employers and unions have the opportunity to make crucial design decisions now that ensure we manage this new technology well. If they don't act soon, it may be too late.'

The introduction of the UK's National Minimum Wage (NMW) in 1999 is the single most successful economic policy in a generation, according to the Resolution Foundation.

The NMW has increased the pay of the UK's lowest paid workers by £6,000 a year compared to their earnings simply rising in line with typical wages, says a report from the thinktank.

The report notes that the policy was introduced 25 years ago against a backdrop of rising pay inequality.

Between 1980 and 1998, hourly pay growth in the UK was twice as fast for the highest earners as it was for the lowest earners.

But since 1999 – when the NMW was brought in – this trend has reversed, and hourly pay inequality has fallen with pay growth for the lowest earners five times that seen by the highest earners.

Nye Cominetti, Principal Economist at the Resolution Foundation, said: 'The policy was introduced in the face of fierce opposition, but now experiences strong cross-party support. With its current remit ending this year, now is the time to discuss the future of the minimum wage and low pay more widely ahead of the election.

'Politicians should reflect on why the minimum wage has been so successful – such as the combination of long-term political direction and independent, expert-led oversight – and whether this approach could be broadened to tackle some of the UK's other low pay challenges.'

The productivity and efficiency of SMEs is suffering as a result of poor HMRC services, according to members of the Association of Chartered Certified Accountants (ACCA).

In a survey of ACCA members, 66% said that poor HMRC services were having a negative impact on their clients, with small businesses 'bearing the brunt' of this issue.

This is a 14% increase in negative sentiment from the previous ACCA survey in October 2023, demonstrating that SMEs are 'reaching breaking point with the service'. 

Glenn Collins, Head of Strategic and Technical Engagement, ACCA UK, said: 'Our members have repeatedly raised that dealing with HMRC is the number one issue they face in their daily work.

'Repeatedly we hear from our members of delays around basic requests such as VAT registration numbers, and a severe lack of skilled staff to handle more complex enquiries. This most recent survey reiterates our previous feedback to the Chancellor and HMRC and shows that in the space of six months service levels have declined even more.

'ACCA will continue to call for the Chancellor to properly fund HMRC, raise the levels of service standards, and to lean on accredited finance professionals wherever possible to ensure accuracy across the board.'

Small UK firms are still being hampered by late payments, warns the Federation of Small Businesses (FSB).

The business group found that the proportion of small firms whose late payments worsened in the final quarter of 2023 rose from over one in four to over a third.

The FSB said that small businesses have 'dampened' growth expectations for 2024.

It also found that the percentage of firms seeking to increase their capital investment stayed flat between the third quarter of 2023 and the fourth quarter.

Martin McTague, National Chair of the FSB, said: 'Late payment is a scourge, and one that shouldn't exist – there's no excuse, with modern business banking methods, for large companies to hold onto money due to small suppliers.

'Overdue invoices cause uncountable amounts of stress and harm to small business owners, leading to sleepless nights and lost productivity. Large companies should make their payment performance a board-level issue, and include it in annual reports, to improve accountability and transparency.

'Small firms contain the dynamism and the ambition to grow that will get the economy up and running, if they are given the right conditions to flourish, invest, and make their mark.'