The vast majority of UK businesses believe the cost of complying
with the UK tax system has escalated over recent years, according
to new research released today (Wednesday) by the British
Chambers of Commerce (BCC) in partnership with
Avalara.
A survey by the BCC of over 1,100 firms from across the UK found
that three in four (75%) believe the overall burden of tax
administration and compliance – the HMRC equivalent of ‘red tape’
– has increased compared to five years ago.
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.
The results of the survey show that two-thirds (64%) of
businesses say that VAT creates the biggest administration and
compliance burden, a finding mirrored in the responses of firms
of all sizes and sectors. Businesses continue to report
confusion over the vast array of rules and rates, suggesting that
ministers’ focus should be on reducing the complexity of VAT
administration to help boost firms’ growth – rather than
tinkering with the VAT threshold.
On top of that, businesses are facing further demands on their
time and money to be ready for the introduction of the
government’s Making Tax Digital project, which the BCC has called
upon ministers to delay until the start of the 2020/21
financial year*. At the same time, companies remain unclear about
how the VAT system will
function when the UK leaves the EU.
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.
While the BCC continues to support the government’s attempts to
tackle the aggressive tax avoidance by a small minority of firms,
our research shows that there is also a real need to lower
compliance costs, transaction costs, and complexity of tax for
business. The BCC therefore calls for investment in HMRC’s work
on tax evasion to be matched by investment in support for
businesses to make compliance easier and improving the processes
for collecting tax. There should also be greater independent
oversight of all new tax proposals to assess the potential
administrative burdens on SMEs.
Adam Marshall, Director General of the British Chambers
of Commerce (BCC), said:
“Companies now routinely cite tax administration and compliance,
rather than regulation, as their biggest single source of
administrative headaches.
“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, VP of Global Indirect Tax at Avalara,
said:
“The UK’s VAT Gap, the amount of VAT collected annually versus
expected, 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.”
Ends
Notes to editors:
*The BCC has called for the introduction
of Making Tax Digital to be
delayed for all businesses until the start of
the 2020/21 financial year. This would give HMRC the breathing
space to engage effectively with businesses, ensure that the
necessary software is in place and raising levels of awareness
about the impending changes. While steps have been taken to
free-up capacity, businesses remain concerned that HMRC may still
lack the resources at HMRC to deliver MTD at the same time as
supporting firms through the Brexit process as well as day-to-day
compliance issues. The delay to this initiative would also
provide HMRC with the extra headroom that maybe needed to support
business on these vital issues.
