ABAB small business survey is food for thoughtby
The Administrative Burdens Advisory Board, established to give HMRC insight, has published the results of its 2022/23 survey, showing that the burdens on small businesses are increasing.
HMRC’s Administrative Burdens Advisory Board (ABAB), chaired by Dame Teresa Graham, exists to understand the experience of small businesses engaging with the tax system. ABAB is independent and reports annually to Treasury ministers. I declare an interest as a member of the ABAB board (but all of the views I express here are mine alone).
Two vital sources of information are the ABAB mailbox (open all year round) and the annual Tell ABAB survey. In the past, the annual survey has received around 3,000 responses but this year it elicited just short of 7,500. Around 87% of those responses came from businesses and 13% from agents. The highest proportion of businesses responding declared annual turnover below £85,000, so the voice being heard is very much that of small businesses.
Burdens on business
Depressingly, but unsurprisingly, the survey revealed not only that burdens on business remain a significant concern, but that they continue to increase year on year. Examples cited included the off-payroll working rules, Making Tax Digital (MTD) and changes in import and export procedures.
Respondents expressed a strong desire to speak to a human adviser and – again unsurprisingly – satisfaction levels on response times for telephone calls remained low.
There was, however, better news for HMRC on guidance, with respondents rating the ease of understanding written correspondence and the information on HMRC’s YouTube videos highly.
Of respondents registered for MTD for VAT, 34.5% said that there was some increase in compliance cost compared to only 3.2% who reported a reduction – in terms of time spent, 24.3% reported an increase and 12.9% a reduction. Of those who answered the question, 37.3% said they were able to submit their VAT returns more quickly through MTD for VAT, though only 6.5% said they felt MTD meant they had more accurate records and only 7.5% said they had a more up-to-date picture of their business finances.
Given that major drivers for MTD were improving the quality of business records and reducing compliance costs, these responses are concerning. They reinforce the sense that many businesses have not yet witnessed benefits from digitalisation.
Only agents were asked questions on Basis Period Reform (BPR). Those who believed that BPR would result in an improvement in business taxation and reduce businesses’ compliance costs in the long term were outnumbered almost three to one by those who did not. That does not surprise me: I have not spoken to a single practitioner who considers BPR a simplification.
Only 5.4% of respondents said that their experience when engaging with HMRC had improved in the past 12 months. Of those who answered, 61% said that it had stayed the same and 33.5% said it had worsened.
On webchat and telephony, 25.3% of respondents who answered rated it as good, with a further 7% rating it as excellent. 27.8% however, rated it as average and 39.8% as poor. These responses are almost identical to those received in 2022.
Of those who answered the question, 42.9% said that response times on HMRC helplines were poor, and 20.5% said that they were bad. Only 7.4% rated response times as very good.
These statistics make depressing reading.
There was a far more positive reaction to HMRC’s YouTube videos, with 47.4% of respondents who had seen them rating them as good and a further 5.6% rating them as excellent. Only 10.9% rated them as poor.
Experience of HMRC’s correspondence overall was also positive, with 36.1% of those who answered saying that correspondence was easy to read and 14.9% saying it was very easy. Only 6.8% said it was difficult to read and 2.7% very difficult.
Back to the beginning
ABAB’s primary focus is understanding the administrative burdens that the tax system places on small businesses. The 2023 survey gave a stark answer: 51.2% of those who answered said the burden was unchanged over the year and 46.5% said it had got worse. Only 2.1% said burdens had reduced.
I spent 40 years advising small and micro businesses and I see two undercurrents in this survey.
The first is that for small businesses, every new administrative requirement is an addition to what they already have to deal with. There is no “one in, one out” here but an ever-increasing accretion. It is an issue that desperately needs addressing.
The second is the shift from direct human contact to digital services over recent years. This is not exclusive to HMRC – pretty much every tax authority the world over has been forced down the same route in order to “do more with less”. And it is not just tax authorities. I have spent countless hours of exasperation dealing with web-based “customer services”, from airlines to parking to insurance. I have also used some absolutely brilliant online services. On the occasions when I have been close to screaming with frustration however, the solution has almost always been provided by a calm, well-trained human being on the end of a phone line.
I remain an enthusiast for digital services and for digitalisation of significant elements of tax administration. But to be effective, digital services must be designed around the actual needs of taxpayers and the service channels they are intended to replace should only be withdrawn when the new digital services are working well. The true judges of success must always be the businesses and citizens who have to use them. They are, after all, the ones who pay for these services.
The annual Tell ABAB survey gives small businesses and those who advise them a way of sharing their experience. Good or bad, hearing what they have to say is important. This year’s survey provides much to reflect on.
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Paul Aplin was for many years a tax partner with an independent West Country firm. He is a past president of ICAEW, a former Chair of the ICAEW Tax Faculty, a member of CIOT Council and the Tax Technology Committee of CFE. He is a non-executive director of three companies, a member of HMRC’s Admin Burdens Advisory Board and the OTS Board....