Three in four UK businesses say that the time and money they spend complying with the UK tax system is much higher than it was five years ago.
The British Chambers of Commerce (BCC) carried out a survey of over 1,100 firms. The majority said that the overall burden of tax admin and compliance is on the rise.
Two-thirds of businesses said that VAT creates the biggest burden. This was regardless of the size of the firm or what sector it operates in. Businesses also reported confusion over the vast array of rules and rates.
BCC’s research found that PAYE/National Insurance contributions (54%) and corporation tax (41%) were the next biggest sources of complaint. For many businesses, calculating National Insurance contributions remains overly complex. Firms said they are also confused about the thresholds and rates they are required to pay.
In the near term, companies unfortunately face further a headache. They remain in the dark about how the VAT system will function when the UK leaves the EU. They must also ready themselves for the introduction of the government’s Making Tax Digital project. This is something the BCC has recommended delaying until the start of the 2020/21 financial year.
Time for change
Responding to the results, BCC has called 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.
It has also suggested that ministers’ focus should be on reducing the complexity of VAT administration to help boost firms’ growth. This is rather than tinkering with the VAT threshold.
“Companies now routinely cite tax administration and compliance, rather than regulation, as their biggest single source of administrative headaches,” Adam Marshall, BCC director general, said. “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.”
Support rather than penalise
BCC has said that HMRC’s work on tax evasion should be matched by investment in support for businesses to make compliance easier. There should also be greater independent oversight of all new tax proposals. This is to assess the potential administrative burdens on SMEs, it said.
“HMRC must be given both resources and a clear remit to focus more on supporting, rather than pursuing and punishing, small and medium-sized (SME) firms, as they work to get tax right,” Marshall added. “We want to see more investment in frontline HMRC support that’s geared towards making compliance easier for SMEs.”