In the second of its reports on small businesses, the Office of Tax Simplification (OTS) has called for a new package of start-up guidance, a strategic review of the PAYE system, progress on implementation of HMRC’s agent strategy, and simplified corporation tax reporting.
The new report, Simplifying everyday tax for smaller businesses, follows a call for evidence between October and December 2018 and concentrates on day-to-day administrative matters facing businesses with fewer than 10 employees and annual turnover below £2m.
The first report, Simplifying the taxation of key events in the life of a business, was published in April 2018 and covered the key events occurring at different stages during the lifetime of a business.
The latest report highlights starting up, registering for tax, and taking on a first member of staff as the points at which tax and regulatory challenges are most acute for small businesses. The OTS’s recommendations fall into five main themes:
The OTS makes ten core recommendations:
In addition, the report suggests exploring an optional PAYE-like experience for self-employed people. Several of the smaller businesses who responded to the call for evidence said they would welcome the option to have an appropriate amount of tax deducted from their income each month. The OTS considered this idea in its July 2018 paper, Platforms, the platform economy and tax simplification.
The report also contains nearly 30 smaller process recommendations, each of which the OTS believes could help improve the experience of tax filing for taxpayers and HMRC without the need for new legislation.
Launching the report, Bill Dodwell, OTS tax director, said: ‘Many new businesses are formed without sufficient help and guidance. This can lead to mistakes being made, resulting in substantial costs or penalties as their tax compliance affairs are put in order. We recommend that government offer better and more readily accessible guidance, joined-up across government and communicated through multiple channels, to help people starting small businesses.’
In relation to PAYE, which accounts for around 40% of total UK tax receipts, Dodwell added: ‘It is time for a new review of PAYE, to look at areas where the inputs from employers do not work well and how they are processed by HMRC to update tax codes and the new personal tax accounts. The review needs to update PAYE for modern working patterns.’
The CIOT gave an enthusiastic welcome to the OTS’s recommendations. Tina Riches, chair of the institute’s owner-managed business sub-committee, commented: ‘Tax advisers that act for small businesses have been calling for change in a number of these areas for years. It is great that the OTS has picked up on many of them and is calling for action to be prioritised’.
The CIOT would also support the appointment of a senior official to oversee and prioritise implementation of HMRC’S agent strategy. Tina Riches added: ‘This whole area has been under the HMRC microscope for years, but requires more resources and HMRC’s full attention so that small businesses can be appropriately supported’.
‘Too often systems are designed with only taxpayers in mind and not their agent. Some parts of the tax system exclude agents, others have the agent access as a poorly designed add-on and other parts allow anyone with client authorisation to act, even where they do not have the skills to do so’, Riches said.
See bit.ly/30yXOE2.
In the second of its reports on small businesses, the Office of Tax Simplification (OTS) has called for a new package of start-up guidance, a strategic review of the PAYE system, progress on implementation of HMRC’s agent strategy, and simplified corporation tax reporting.
The new report, Simplifying everyday tax for smaller businesses, follows a call for evidence between October and December 2018 and concentrates on day-to-day administrative matters facing businesses with fewer than 10 employees and annual turnover below £2m.
The first report, Simplifying the taxation of key events in the life of a business, was published in April 2018 and covered the key events occurring at different stages during the lifetime of a business.
The latest report highlights starting up, registering for tax, and taking on a first member of staff as the points at which tax and regulatory challenges are most acute for small businesses. The OTS’s recommendations fall into five main themes:
The OTS makes ten core recommendations:
In addition, the report suggests exploring an optional PAYE-like experience for self-employed people. Several of the smaller businesses who responded to the call for evidence said they would welcome the option to have an appropriate amount of tax deducted from their income each month. The OTS considered this idea in its July 2018 paper, Platforms, the platform economy and tax simplification.
The report also contains nearly 30 smaller process recommendations, each of which the OTS believes could help improve the experience of tax filing for taxpayers and HMRC without the need for new legislation.
Launching the report, Bill Dodwell, OTS tax director, said: ‘Many new businesses are formed without sufficient help and guidance. This can lead to mistakes being made, resulting in substantial costs or penalties as their tax compliance affairs are put in order. We recommend that government offer better and more readily accessible guidance, joined-up across government and communicated through multiple channels, to help people starting small businesses.’
In relation to PAYE, which accounts for around 40% of total UK tax receipts, Dodwell added: ‘It is time for a new review of PAYE, to look at areas where the inputs from employers do not work well and how they are processed by HMRC to update tax codes and the new personal tax accounts. The review needs to update PAYE for modern working patterns.’
The CIOT gave an enthusiastic welcome to the OTS’s recommendations. Tina Riches, chair of the institute’s owner-managed business sub-committee, commented: ‘Tax advisers that act for small businesses have been calling for change in a number of these areas for years. It is great that the OTS has picked up on many of them and is calling for action to be prioritised’.
The CIOT would also support the appointment of a senior official to oversee and prioritise implementation of HMRC’S agent strategy. Tina Riches added: ‘This whole area has been under the HMRC microscope for years, but requires more resources and HMRC’s full attention so that small businesses can be appropriately supported’.
‘Too often systems are designed with only taxpayers in mind and not their agent. Some parts of the tax system exclude agents, others have the agent access as a poorly designed add-on and other parts allow anyone with client authorisation to act, even where they do not have the skills to do so’, Riches said.
See bit.ly/30yXOE2.
