3 out of 4 UK businesses are burdened by compliance
by Alexander Beard, on Sep 24, 2018 4:57:37 AM
According to recent figures, 75% of British businesses feel weighed down by the burden of tax administration and compliance. It is believed that this has increased considerably in recent years, with some people describing the tax system as positively Byzantine.
While the introduction of new tax reliefs and tax breaks has been welcome, the amount of paperwork required to access these reliefs has increased. As a result, businesses are faced with a complex and bureaucratic landscape.
Of course some due diligence is seen as necessary but as things now stand, many companies are saying it is just too much of an administrative hassle.
HMRC have made attempts to make things simple, even launching a service on Amazon’s Alexa where you can ask about tax credits but this is just a small step. In recognition of the problem, the Office of Tax Simplification has instigated a review of how compliance-related practical difficulties and penalties are contributing to the tax gap.
To muddy the waters still further, the Making Tax Digital (MTD) initiative is due to come into force on 1st April 2019. This is designed to make the tax system more efficient for HMRC and more straightforward for taxpayers. It will be a completely digitalised system with three key criteria regarding the submission of returns:
- digital record keeping, with all VAT registered companies having to store transactions electronically,
- a digital link between the final numbers and their source data,
- the use of approved software through HMRC’s new gateway.
Given all the uncertainty around Brexit and the 29th March deadline, this seems particularly bad timing. It is felt, in some quarters, that HMRC’s focus should be on helping businesses through that instead.
Many smaller businesses in the UK are not thought to be ready for MTD. According to the British Chambers of Commerce (BCC), 24% of firms had never heard of it and only 10% of firms knew ‘a lot of details’ about it which has led to calls for a delay.
Although MTD is only applicable if you are VAT registered, with the threshold being relatively low at £85,000 turnover, there are still many smaller businesses who won’t have the necessary IT system set up. Nevertheless, although it is thought there will be some leeway, an outright postponement is unlikely.
On the plus side, the UK has been ranked as having the lowest burden of regulation in the G7. The government has also made a commitment to save businesses £9bn on red tape during the course of this parliament. Whether that will be achieved is, of course, another matter.