Opinion Former Article

OTS on the money with its small business tax recommendations

The Chartered Institute of Taxation (CIOT) backs the Office for Tax Simplification’s (OTS) call for the Government to prioritise action to address long-standing concerns about the experience of smaller businesses. The CIOT agrees that the Government should offer better and more readily accessible guidance, joined-up across government and communicated through multiple channels, to help people starting small businesses.

The OTS report contains major recommendations in five areas and other important suggestions for improving HMRC processes.

Tina Riches, Chair of CIOT’s Owner Managed Business Sub-committee, said:

“The OTS is on the money with its recommendations to address the tax challenges faced by small businesses. 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.”

On the recommendation that the Government should develop and offer small businesses a package of start-up guidance, Tina Riches said:

“Starting a new business can be daunting for individuals. Online guidance may be comprehensive, but appears often to be a vast black hole for new business owners, who may not know what they are supposed to know or what to look for. Having a single place to visit and find links to the key areas they need would improve their chances of success and reduce the risk of defaulting.

“One of the most important areas is around removing the barriers for those professionals that are genuinely trying to help small businesses. Many businesses realise that their business can be more successful if they concentrate on running the business and outsource specialist areas. This includes using a tax adviser to assist with their tax compliance.”

The CIOT also supports the OTS suggestion that HMRC appoint a senior official to oversee and prioritise implementation of the Agent Strategy and a separate OTS suggestion that HMRC should routinely build agent awareness and needs into system design and improvement and its related guidance. Tina Riches said:

“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. 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.”

The CIOT supports the OTS’s recommendation that HMRC takes a look at PAYE and RTI and their interaction. This is a significant area for small businesses. It also supports exploring ways to reduce the number of companies having to file two tax returns to cover first accounting periods that are slightly longer than 12 months; this will help prevent mistakes and make it easier to understand. The current process often requires tax returns to be made for different periods to the accounting periods, which can be counter-intuitive, says the CIOT.

Notes for editors

1. The Simplifying everyday tax for smaller businesses report can be found here. The report was commissioned by the Chancellor of the Exchequer and the scoping review was published in July 2018 

Small businesses are a major part of the UK economy. They make up over 99 per cent of all the 5.7 million businesses in the UK, employ 12.9 million people and pay over £205 billion in tax.

The report explores for the first time the tax challenges faced by businesses by reference to the stages a developing small business might go through in its engagement with the tax system. What has emerged are several long-standing concerns which now, as the economy and the world of work continue to evolve, it is especially important that the government prioritises.

The report contains major recommendations in five areas and other smaller suggestions for improving HMRC processes.

2. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,400 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk

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