Firms 'held back by tax complexity'. By Dan Martin

Posted by AccountingWEB PM | on Fri, 21/04/2006 - 10:21 2071 1 comment

UK businesses' international competitiveness is being stifled by a increasingly complex tax system, the Institute of Directors has warned.

A poll by the Institute of Directors (IoD) revealed two thirds of businesses believe the UK tax system has become more complicated during the past five years, while half of firms complained that the complexity has forced them to spend increasing amounts of money on tax planning and compliance.

With regulations and rules becoming more complicated, 60% of businesses said the UK's international competitiveness is being stifled.

Continued...

Don't let's ask for the moon

Anonymous | Fri, 21/04/2006 - 14:46 | Permalink

Reading this article and the one in the FT today I remembered what Albert Einstein said “Any fool can make things bigger, more complex………. It takes a touch of genius-and a lot of courage-to move in the opposite direction”.

There have been continual outcries from various institutes and professional bodies that tax legislation be simplified and rightly so. The IoD has joined in the “virtual” petition to assist companies and businesses by reducing administration and making legislation more straight forward.

Following the Carter report and KPMG’s research into reducing the administrative burden on small business we have to take the optimistic approach and believe that this is going to make a difference to the efficiency of running a business.

It is however the legislation itself which drastically needs to be tapered (excuse the pun). The budget brought this very much to the fore in the announcement of changes to corporation tax legislation. There was something which made me think “Hokey Kokey” about the removal of the zero and NCD rate and the increase in FYA for plant.

Even something as undemanding as the calculation of Capital Allowances requires the memory man from the 39 Steps; 50%, 40%, 50%, 40%, 50%........

As for the removal of the NCDs and the 0% rate, guidance has been issued and although the straddling periods will be a bit tricky without the 2006 CT600, at least there are no additional rules to deal with and returns for the affected periods can be filed without waiting.

This type of decision, although appearing as back tracking is at least making this area of legislation slightly simpler, unlike the mistake of the 0% rate giving rise to an over-complex NCD calculation.

What also has to be borne in mind is the effect of these constant changes on the advisor or agent. Not only does he have to keep up to date with constant changes but advice given one year (e.g. “incorporate!!”) is reversed shortly afterwards!

In the UK we have one of the most intricate tax systems in the world and yes it would take a very brave man to rewrite the system. Of course in a perfect world we could start from scratch. Realistically let’s stop adding and condense what exists. That alone would no doubt do away with a high percentage of time spent on queries.

If not, possibly a target system – the paper required for each year’s tax publications should be reduced by 10% per annum?