Tax ‘red tape’ holding back businesses
A majority of British businesses agree that the cost of complying with the UK tax system has increased in recent years, according to new evidence from the British Chambers of Commerce (BCC).
A BCC survey of 1,100 firms found that three-quarters of businesses believe that the overall burden of tax administration and compliance has increased compared to five years ago.
Director General of the BCC Adam Marshall called on the government to reverse the burden of tax administration.
He 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.”
According to the survey, VAT was the chief cause of concern for most businesses. Two-thirds (64%) of firms said that VAT creates the biggest administration and compliance burden with dozens of complex rules and rates for finance teams to unpick.
PAYE/National Insurance Contributions (54%) and Corporation Tax (41%) were also identified as compliance burdens for UK businesses.
The BCC focused on the government’s Making Tax Digital project as an area of future concern.
From April 2019, Making Tax Digital for VAT will require all VAT registered businesses with a taxable turnover above the £85,000 VAT threshold to keep digital records and regularly report these to HMRC.
Digital VAT records can be kept using cloud-based software including Xero and FreeAgent. Both of these software packages are HMRC compliant.
Arguing that a significant number of smaller firms do not have the correct software and are not ready for Making Tax Digital, the BCC has called for the scheme’s introduction to be delayed until the start of the 2020/21 financial year.
A statement form the BCC said that while it “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 the complexity of tax for business.”
The business interest group has urged the taxman to match its work on tax evasion with investment in support for businesses to improve tax collection and make compliance easier.
Miles Grady, Director of said: “There is no doubt that the tax code has got bigger over the last couple of decades. Rules, tax breaks and reliefs all serve a purpose in the economy, and some of them are welcome, but the administrative burden involved is too much for businesses, especially smaller firms.
“The easiest way for small and medium sized businesses to ensure compliance and avoid red tape strangulation is to use cloud-based software backed up by a team of experienced accountants. Software like Xero is cheap, easy to implement and importantly, it is HMRC-approved for Making Tax Digital.”