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Tax administration remains a burden for small businesses

A recent report from the Administrative Burdens Advisory Board (ABAB) highlights a number of interesting points regarding the tax administration burdens facing small businesses.

Who are ABAB?

ABAB are an independent body made up of representatives of the small business and agent community. They act as a ‘critical friend’, offering insight and expertise together with constructive challenge and support regarding how tax administration and regulations affect small businesses.

In November 2022, ABAB released their annual report. This was informed partly by their most recent annual Tell ABAB online survey, which was relaunched in 2022 following a break during the pandemic.

Making Tax Digital a cause for concern

The main topic covered in the ABAB report is HMRC’s Making Tax Digital (MTD) programme. Under MTD, businesses are required to keep digital records, and use compatible software to file reports and returns with HMRC.

MTD for VAT was extended in April 2022 to cover all VAT registered businesses and, at the time of the ABAB report, it was anticipated that MTD for Income Tax Self-Assessment (MTD for ITSA) would be introduced from April 2024. 

The Tell ABAB survey showed that, once businesses had signed up for MTD for VAT, they found the system fairly satisfactory.  However, there was little evidence of any cost or time savings for them.  The survey results were more concerning for MTD for ITSA, with some businesses unaware of the planned roll out, and the majority anticipating a significant increase in their compliance time and costs of as a result of it.

Whilst ABAB remain of the view that there are benefits in digitalisation, they highlight a number of unresolved issues with MTD for ITSA, including the limited nature of HMRC’s pilot.  As a result, they concluded that the costs and burdens associated with MTD for ITSA should be reassessed, especially as they relate to smaller businesses, and that the whole project should be delayed by a year. 

ABAB were therefore no doubt happy to see that, on 19 December, it was announced that the roll out of MTD for ITSA would be delayed by a further two years, with the Government committed to reviewing the needs of smaller businesses before taking any decision on when and how they should be brought into the scope.

COVID relief schemes generally handled well

The Tell ABAB survey sought opinions on the various COVID relief schemes and easements delivered by HMRC during the pandemic.

Overall feedback from participants was generally positive, with 55% saying that HMRC’s response to the pandemic was either ‘excellent’ or ‘good’.

Looking at individual schemes, respondents seemed very satisfied with the process for claiming Self-Employment Income Support Scheme grants (77% rating this either excellent or good), and only slightly less satisfied with the Job Retention Scheme (67% rating it excellent or good).  However, responses were less positive regarding the ease of contacting and working with HMRC to amend a claim, with 41% rating this as poor. Overall, it appears that those who could deal with claims online were very satisfied, but those who needed to contact HMRC were much less so.

What else did the ABAB survey show?

ABAB routinely ask for views on HMRC forms which are problematic.  Examples highlighted in this year’s survey included the P11D / P11Db and Form 64-8 (used for appointing an agent).  Feedback indicated that these forms need to be standardised and made more accessible.

Another area which ABAB routinely ask about is communication with HMRC.  The results from their survey showed that telephony and webchat remain some of the most popular routes, but were not well rated, indicating that more resources are needed to support these.

Finally, ABAB conclude that businesses are not feeling any let-up in the increase in regulatory burdens they face, with a significant number also feeling that their HMRC customer experience had deteriorated since the previous year.

 

This article reflects the position at the date of publication (23 January 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.