Tax complexity and ‘red tape’ is holding businesses back, study finds

Over recent years the UK tax system has become incredibly complex and this has been recognised by the vast majority of UK businesses, according to research from the British Chamber of Commerce (BCC) Avalara.

Three in four businesses (75 percent) believe that the overall burden of tax administration and compliance with HM Revenue and Customs (HMRC) ‘red tape’ has increased compared to five years ago, according to a survey of more than 1,100 firms across the UK.

Two-thirds (64 percent) of businesses said the biggest burden today across the board, regardless of the firms’ size or sector, was VAT. This generates the largest about of administration and compliance burden, as well as confusion over the complex array of rules and rates, the survey found.

Suggestions included that there should be a reduction of the complexity of the VAT administration to help boost firms’ growth, rather than amending the VAT threshold.

Additionally, companies are facing further demands and deadlines under the Government’s ‘Making Tax Digital’ project, but at the same time businesses are being kept in the dark regarding how the VAT system will function when the UK leaves the EU.

The next top two burdens after VAT according to the research include PAYE/ National Insurance Contributions (54 percent) and Corporation Tax (41 percent). Many businesses identified the complexity of calculating National Insurance Contributions, alongside significant confusion over the thresholds and rates that are mandatory to pay.

The research shows that the main areas that need to be addressed include the need to lower compliance costs, transactional costs and complexity of tax for business. There should also be greater independent oversight of all new tax proposals to assess the potential administrative burdens on small medium-sized enterprises (SMEs).

Director of the BCC Adam Marshall said, “HMRC must be given both resources and a clear remit to focus more on supporting, rather than pursuing and punishing, small and medium-sized firms, as they work to get tax right. We want to see more investment in frontline HMRC support that’s geared towards making compliance easier for SMEs. There should also be greater independent scrutiny of new tax proposals with the aim of minimising the administrative burden on business. Making tax administration simpler would provide businesses with more time and headroom to focus on investment and growth.”