Payroll admin burden on small businesses a drag on UK plc
The CIOT makes the call in its submission to a review of the competitiveness of tax administration in the UK being conducted by the Office of Tax Simplification (OTS). As part of a drive to generate ideas for a more competitive UK tax system, the OTS’ review asked businesses, taxpayers and their advisers to submit their thoughts on how administration of taxes can be improved to produce an environment in which UK businesses and taxpayers can thrive.
CIOT Employment Taxes Sub-Committee chairman, Colin Ben-Nathan, said: “The competitiveness of a tax system is crucial for businesses and taxpayers who operate within its jurisdiction. Of course part of this is about rates, but survey after survey has found that, for many, administrative burdens are at least as important. If a particular tax is complex to administer more time and effort must be devoted to processing it, forsaking resources which could otherwise be used more effectively elsewhere.
“Last year the CIOT polled its members to gather views on the effect Pay-As-You-Earn Real Time Information (RTI) is having on employers and the challenges they face in having to report immediately to HMRC on pay paid to their employees. Over half of the respondents replied that small employers should be allowed to opt out of RTI reporting, saying their clients found it too prescriptive, time consuming, and even unworkable.
“On making payroll reporting more competitive, we suggest that Government allows small businesses to report employees’ pay monthly to HMRC, rather than on or before each payment is made, so as to reduce the administrative burden. This approach would certainly chime with a key theme of the proposed Small Business, Enterprise and Employment Bill3 which the Government has said is designed to ensure red tape that affects small business is frequently reviewed to ensure that regulations are either cut or otherwise remain justified.”
The CIOT has also queried how HMRC and the Department of Work and Pensions (DWP) use RTI data. The Institute asks whether it is really the case in the pilots on Universal Credit (UC) that the data is being used instantaneously by HMRC/DWP to impact on the UC payment being made, i.e. would less burdensome monthly reporting not do pretty much the same job? On the other hand, if the Government is capable of using RTI data immediately, why are HMRC’s systems apparently not yet able to use RTI data to adjust employees’ and pensioners’ tax codes in real time to ensure that they are paying the right amount of tax in-year?
The CIOT expresses support in its submission for the OTS’ recommendations on simplifying employee benefits and expenses, and also backs the current OTS review of the taxation of termination payments and living accommodation.
Colin Ben-Nathan added: “The CIOT fully agrees that making the UK tax system more competitive and easier to administer will increase businesses’ certainty and confidence in managing their obligations, and reduce time and money spent on administration. This in turn will boost the UK’s economic growth. No doubt the OTS will make a number of sensible proposals on what can be done, but key will be for the Government to demonstrate its resolve by taking those proposals seriously and driving through changes which really make a difference. Actions speak louder than words.”
