Writer
Columnist
Share this content

OTS: Roll out that big block of cheese

Wendy Bradley has some radical ideas for the OTS to adopt when pushing forward changes to small business tax reporting and payment systems.

10th Dec 2019
Writer
Columnist
Share this content
block of cheese
istock_creacart_bc

I have looked before at the Office of Tax Simplification's work on small business and landlords' tax. They have now produced a fuller (44-page) report "Tax reporting and payment: Simplifying tax for self-employed people and residential landlords".

What’s next?

The OTS suggests the next government should commission further work by them or by HMRC in three areas:

  • Integrating (and improving) the personal tax account (PTA) with the business tax account (BTA), so each small business only has to deal with one account
  • Intermediary and third-party reporting
  • Changes to tax payment methods, either via the PTA or via some sort of withholding tax method.

These points are essentially, the same areas the OTS explored in September 2019 and, although the report contains some decent analysis of the current position, there are no concrete suggestions that would make a real difference in the near future.

No clear path

My view is that the direction of travel is radical but we are muddling towards it.

Do we want a radical change to small business taxation? It appears we drifting towards it with half-baked schemes like MTD. This started out as "make tax easier" and end up with arguably “make tax difficult,” least for some, which assists neither the taxpayer nor HMRC.

The cheese question

I think the weak point is in the remarkably short list of stakeholders consulted in producing the OTS document (Annex B page 41). There are only 24, of which six are tax or accountancy bodies rather than small business representatives.

The OTS should watch that episode of The West Wing where they have "Big Block of Cheese Day". This is when small organisations that would not usually have a chance to lobby government are invited into the inner sanctum (of the American White House). It may have begun as fiction but the Obama government made it real.

Wendy in charge

If I were running OTS I would ask everyone in the office to come up with twenty-six occupations or small businesses, one (or more) for each letter of the alphabet. Then compile them into one list, delete the duplicates and then go through and contact each organisation or group representing each sector.

When VATMOSS was being legislated, no-one thought to consult with the Society of Authors, so the needs of writers who sell small numbers of electronic books across borders were not considered.

An organisation of (say) coffee shop proprietors, chiropodists, or care-workers is unlikely to have a policy worker scanning the tax press for details of upcoming consultations that might affect them. But the OTS is looking to push the tax system in a direction that could make the small business landscape look radically different. Would it not be prudent to do some proactive work on how those proposals look from the ground floor?

Leadership

I want to see some thought leadership from the OTS. For example:

  • HMRC needs a serious chunk of money to build itself a new computer system that actually works, for the customer as well as the tax authority
  • HMRC should give away tax software to small businesses to use free of charge, and let them use it or not, as suits the business.

The OTS is the organisation best placed to advise the Treasury and the government to take these steps.

The nearest the OTS get is para 3.4 of the report  when asking HMRC to make all payment information accessible and visible to each self-employed person: "HMRC would need to have the right systems in place to make this happen. This is not currently the case and will require additional funding to be secured."

I also approve of para 3.8 where the OTS accept that for some people the biggest simplification will be to leave things as they are: “If it ain't broke, don't fix it.”

Roll out the cheese

Do a “big block of cheese day” and come back with some firm proposals based on a wide consensus and I'll be impressed.

I give this latest OTS report C+ for effort. You can do better OTS! 

Think BIG cheese.

Replies (2)

Please login or register to join the discussion.

By ireallyshouldknowthisbut
10th Dec 2019 13:39

The issue for me is it seems the misnamed OTS, is actually about revenue collection.

They perceive a big loss in revenue in some sectors, but since the tax enquiry system has been largely abandoned for small landlords (other than non-reporting in its entirety, via the let property campaign which in itself seems to have been scaled back) and small business in general, there is no systematic checking being done to ensure small business pay enough tax, so no doubt there is a lot of underreporting of income and faked expenses going through. If people get away with a small items they will keep on coming back with bigger ones.

Rather than simply state the obvious "we need more tax inspectors for existing business" and "we need more investigative units looking for people not in the system" they are looking for technical solutions. A cursory look at Amazon market place ought to be a fertile area for a huge number of VAT and income tax investigations. (There are sellers with thousands of feedbacks apparently trading under the VAT threshold for example. Its blatant.)

The tech solution (which I think is simply not understood by those writing the reports) are then sold to the public as "time saving" and to the HMRC as an easy solution. They seem to be blindsided by the assumption that tax evaders would fall into their trap and use all of this, when in reality if you are operating outside of the system, all you are doing is creating another barrier to come clean by making it very hard to comply for the less tech literate members of society who are probably the very ones doing all the cash in hand jobs.

Once you understand the motivations, the bizarre conclusions on the reports they push out make more sense.

I also think they have a huge issue with 'fake self employed' such as delivery drivers, who would 10-15 years ago all have been on PAYE but HMRC seem to have allowed to be self employed by poor enforcement of existing laws. These workers as they are often earning at around minimum wage are not worth HMRC hitting one by one for a few hundred pounds a go, and often if you did they would be bankrupt to no income for HMRC. So essentially they get tax free cash for little risk. It seems these are the people who they are talking about for self employment, not people with proper businesses. The answer to those issues is not quarterly reporting, but PAYE enforcement.

Thanks (3)
avatar
By kjevans
11th Dec 2019 10:50

I really hope this doesn't mean all small businesses, not just landlords, are going to be subjected to a type of tax on turnover, with not all business-related expenses being allowable. I think most people would want to keep personal and business tax separate

Thanks (0)