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British businesses ‘burdened’ by byzantine tax system

8th Aug 2018
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A new survey by the British Chambers of Commerce found that three out of four UK businesses surveyed believe the burden of tax administration and compliance has increased compared to five years ago.

As the number of tax reliefs and breaks have spiralled, and with MTD on the horizon, it’s perhaps not hard to understand why businesses are feeling the pinch. Add in Brexit, and the administrative picture becomes murkier.

“The situation is getting more complex for businesses,” said Nick Blundell, a tax partner at RSM. “As the government has introduced more tax reliefs to business, it’s increased the paper work for businesses to access those reliefs.”

Some due diligence is required, said Blundell, but the accessing breaks and reliefs have proved too much of an “admin hassle”. The government has tried numerous things to make things simpler - you can now ask Amazon’s Alexa about tax credits, for instance - but it’s failed to improve the issue.

It’s what recently prompted the OTS to launch a review of how compliance-related practical difficulties and penalties contribute to the tax gap.

Blundell commended the OTS for its effort, but said the tax code remains as byzantine as ever. “The size of the tax legislation is three or four times the size it was when I started twenty years ago.”

Mix in MTD, and the picture of British business anxiety comes into relief. Indeed, the BCC recently called for MTD to be delayed, citing a lack of knowledge about the government’s digital tax ambitions.

The BCC’s member research indicated that 24% of firms have never heard of MTD and only 10% of firms know ‘a lot of details’ about it. RSM’s Blundell agreed that smaller businesses especially aren’t ready for April 1, 2019. He added, however, that a delay was “extremely unlikely”.

“You don’t have to be a big business to fall under the auspices of MTD for VAT. You just have to be a VAT-registered business, which isn’t a high turnover threshold. That’s going to going to increase the admin burden on businesses quite a bit

“Larger businesses are well set up for it. But smaller businesses don’t have the IT system set up.” And while Blundell expects MTD to have a “soft landing” with HMRC giving some leeway, he’s concerned about how Brexit will collide with digital taxation, given the two arrive within a month of each other..

The BCC, in its call for an MTD delay, said HMRC’s “immediate attention” should be “supporting businesses through the Brexit process”.

But according to Blundell, there’s a silver lining, too. The UK has been ranked as having the lowest burden of regulation in the G7. The government has also committed to saving businesses £9bn on red tape during this parliament.

Whether that materialises, said Blundell, remains to be seen.

Replies (1)

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By tedbuck
09th Aug 2018 11:48

Surprise surprise.

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