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  • Benjamin Elliott

Making Tax Digital: Letter Testing (Research & Guide)

Updated: Oct 17, 2022

Making Tax Digital: Letter Testing

In 2018, research was conducted on behalf of HMRC into how self-assessment customers may be encouraged to voluntarily sign up for Making Tax Digital. The focus of this research was on communications sent by HMRC, and how effective they were.

By looking at the findings, we can learn valuable lessons about the need for effective contact from HMRC to its customers. We also gain knowledge about the importance of clear communication in the financial and business world.

In this guide, we will look at how the HMRC approach to communication influenced their customers’ perceptions of MTD, and we discover how these lessons can benefit companies.

The Research

This qualitative research study was conducted on behalf of HMRC with Income Tax Self-Assessment (ITSA) customers, as well as agents who work with ITSA customers. This study explored their responses to invitations from HMRC to voluntarily sign up for Making Tax Digital (MTD) for Income Tax.

Customers were generally positive about the concept of a digital approach to taxes. However, due to low awareness of MTD and misunderstanding some of the terminology used, they did not fully comprehend what it entailed. The design of HMRC’s communications was also called into question.

What Were The Main Flaws In MTD Communication Tactics From HMRC?

At the time, awareness of MTD was limited. All forms of contact on the topic had to clearly explain what it was, why and when it was being introduced, and what practical benefits it could offer.

The main flaws identified were that many of the terms used by the HMRC in their transmissions were confusing, and their communications were not interactive enough.

Lack Of Clarity

The businesses targeted by these invitations were not mandated at that time to sign up for MTD. They were, however, open to the idea of finance reporting automation and a digital approach to their taxes.

When there was resistance to MTD, it was mostly due to not fully understanding how to implement it.

Confusing Terminology

The terms included in the HMRC letters such as “pilot launch” only confused the issue. To them, this implied that MTD was not yet fully developed and tested, which made them hesitant to join. It was suggested that HMRC should use terminology that was easier to understand and more elaborative.

Clumsy Layout

Another qualm that customers had about HMRC’s letters was that they were not in a simple enough layout. When letters were printed on both sides of the page and seemed long-winded, they were reluctant to turn the page and continue reading.

Communication Methods Were Not Engaging

Participants in the study also felt that communication was not engaging enough. A better approach might be the issuing of information leaflets as they are easier to distribute, and quicker to read. Leaflets were, in general, seen as a more effective communication tool for introducing MTD.

Agent Advisory Role In MTD Communication

Although this research study aimed to understand how HMRC communications influenced their customers to implement MTD, it brought another important theme to light. And that is the role of agents or other external advisors.

Businesses that make use of the services of an external agent, rely on their expertise and knowledge to guide their decisions. By communicating directly with these customers, HMRC neglected to take this into account.

The role of the agent is thus not only one of bookkeeping and admin, it reaches far beyond their basic job description. In this instance, the agent was seen by their clients as a source of knowledge and guidance for MTD practices.

Therefore, any misinformation, lack of information, or hesitance on the part of the agent directly influenced their clients' decisions around MTD. Since these findings brought this to light, more emphasis has been placed on interactive MTD informational resources for both businesses and agents.

Agents Were Not Adequately Prepared

Those who responded more positively did so because of assurances that MTD was of benefit to others in the same business category as them. However, in interviews with agents, a lot was discovered about the factors surrounding voluntary sign-up.

Many of the agents interviewed for this study had as little knowledge of MTD as their clients. The issue with this was that those businesses who used these agents’ services first approached them with queries about the shift to MTD.

These tax agents were concerned that MTD may entail a greater workload for them and needed more information before being able to recommend an approach to their clients.

In terms of their preferred means of communication, webinars were listed as the popular choice amongst the majority of agents interviewed.

Suggestions From Tax Agents In The Research Study On Letter Testing

1. Agents in the study indicated that webinars would provide a clearer explanation of MTD, and also allowed active participation. This would also allow them to ask direct questions and receive direct answers.

2. The use of short videos, such as YouTube or Loom, explaining the basics of MTD was also suggested.

3. They pointed out that any letters sent to their clients inviting them to join MTD would merely send their clients to them asking for advice. If they had not already received this information from HMRC themselves, they were not able to make any kind of helpful recommendations.

4. The agents also suggested that HMRC identify the customers who had been sent these MTD sign-up invitation letters. This would enable them to prepare in advance for when their clients reached out to them.

5. HMRC could do more to personalise its communications to its clients. It was argued that generic letters inviting businesses to sign up for MTD would be more effective if HMRC included details relevant to the specific recipient of each letter.

MTD Letter Testing FAQs

How Can I Access Accurate Information About MTD?

Since their research into the topic of communication, HMRC has included instructions on MTD and signing up on its site that will walk you through the process.

If you want to check how to follow HMRC's rules for MTD for VAT, find software, or sign up, go to this page. You will find guidance for both businesses and agents.

Are Videos And Webinars Available For MTD?

Yes, these are now available on the help and support page of the GOV.UK site. You will be able to register for free webinars, watch tutorial videos and learn more about MTD, whether you are an agent or a business representative.

I’m An Agent Needing Step-By-Step Instructions For Implementing MTD On Behalf Of My Clients. What Do I Do?

The UK.GOV site has a step-by-step guidance page that deals with this issue. You will find all the steps that you, as an agent, need to follow to register your existing or new clients for MTD.


HMRC conducted several research studies in the lead-up to the launch of MTD. They explored many different facets of the process, aiming to better understand their customers’ understanding of and response to MTD.

This particular study aimed to determine the influence their communications, particularly invitations for voluntary sign-up, had on their customers. The findings gave more insight into the types of communication that businesses responded to.

While the world becomes more and more digitally fluent and capable, the need for clear communication, engaging content and multiple media approaches is as relevant as ever.

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