Business urges government to simplify UK tax
Let's simplify UK tax. That's the simple message from business to the government. And who could disagree?
A survey of 1,100 companies demonstrates a feeling that HMRC red tape is clogging up the wheels of industry.
And three in four firms reckon the cost of complying with the tax system is soaring, according to British Chambers of Commerce (BCC) research.
The BCC says: The escalating time and resources necessary to comply with the UK’s tax system reflects the need for action from government ministers and HMRC to reverse the burden and complexity of administration, and for more support from HMRC for firms trying to stay compliant.
Two-thirds (64 per cent) of groups of all sizes in all sectors believe that VAT creates the biggest administration and compliance burden. There's confusion over the plethora of rules and rates. The research, run by BCC and tax software group Avalara, suggests reducing the complexity of VAT rather than tinkering with the threshold.
Costs of preparing for MTD
Businesses are facing considerable costs preparing for Making Tax Digital. In fact the BCC has urged ministers to delay until the MTD start until 2020/21 . And that's before we get to Brexit.
According to the research, PAYE/National Insurance Contributions (54%) and Corporation Tax (41%) were identified as the next biggest sources of compliance burdens after VAT. For many businesses, calculating National Insurance Contributions remains overly complex, with firms facing significant confusion about the thresholds and rates they are required to pay.
Specifically, the BCC wants to see HMRC’s work on tax evasion to be matched by investment in support for businesses to make compliance easier. Plus there should also be greater independent oversight of all new tax proposals to assess the potential administrative burdens on SMEs, they say.
Tackle the VAT complexity
BCC chief Adam Marshall, says: “If the government wants its ‘Global Britain’ vision to become a reality, it is time to tackle the huge costs and complexities of the UK tax system, which sap away time and resources that could be better spent raising business productivity and growth.
“HMRC must be given both resources and a clear remit to focus more on supporting, rather than pursuing and punishing, small and medium-sized firms, as they work to get tax right. We want to see more investment in frontline HMRC support that’s geared towards making compliance easier for SMEs.
"There should also be greater independent scrutiny of new tax proposals with the aim of minimising the administrative burden on business. Making tax administration simpler would provide businesses with more time and headroom to focus on investment and growth.”
Richard Asquith, of Avalara, adds: “The UK’s VAT gap has remained stubbornly high at £12 billion. As a result, HMRC is stepping up investigations and pushing forward VAT as the first tax in the Making Tax Digital initiative. This new requirement, to record and report digitally, will affect the smallest businesses most – approximately 500,000 still use non-compliant spreadsheets or manual recording.
"These enterprises will have to invest in compliant software, and become familiar with its processes. HMRC’s MTD is being replicated across Europe, with countries like Spain, Italy and Hungary one step ahead of the UK, requiring live sales invoice submissions to tax authorities.”
