1 August 2018

Tax administration and compliance, rather than regulation, is routinely cited by businesses as the biggest single source of their administrative problems.

Calling for HM Revenue and Customs (HMRC) to reverse the burden and complexity of tax administration, the Director General of the British Chambers of Commerce (BCC), Adam Marshall, said that the huge costs and complexities of the current system sap time and resources that could be better spent raising business productivity and growth.

Research by the BCC and tax software company Avalara found that 75% of some 1100 firms questioned think that the overall burden of tax administration and compliance has increased compared to five years ago.

Two-thirds (64%) of businesses say that value added tax (VAT) creates the biggest administration and compliance burden, with companies confused over the vast array of rules and rates.

That, the BCC argues, suggests that the Government’s focus should be on reducing the complexity of VAT administration to help boost growth, “rather than tinkering with the VAT threshold”.

Companies also cited the need to prepare for the introduction of the Making Tax Digital project as another burden and expressed concern that they do not yet know how the post-Brexit VAT system will work.

After VAT, respondents’ next biggest sources of compliance burdens were PAYE/National Insurance Contributions (54%) and Corporation Tax (41%).

For many businesses, calculating NICs remains overly complex, the BCC notes, with firms facing significant confusion about the thresholds and rates they are required to pay.

The BCC wants to see the resources put into HMRC’s work on tax evasion matched by investment in support for businesses, to make compliance easier and improve the processes for collecting tax.

“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,” Mr Marshall concluded.