Calls for ministers to cut red tape of ‘resource-sapping’ business tax rules

● UK firms suffering under complexities of system as 75% cite increased tax costs

Complex tax administration and “red tape” are holding back British businesses, prompting calls to simplify the tax system.

Research from the British Chambers of Commerce (BCC) and tax software company Avalara show that the vast majority of UK businesses feel the burden of complying with tax regulations has escalated in recent years, with three in four saying the cost had increased compared to five years earlier.

According to the survey, twothirds of businesses (64 per cent) said that VAT created the biggest administration, a finding mirrored in the responses of firms across all sizes and sectors.

Companies reported confusion over the vast array of rules and rates, suggesting the issue lies in the complicated nature of the system rather than in disputes over the rate thresholds.

The BCC is now calling for action from government ministers to reduce the complexity of current tax regulations and facilitate additional support from HMRC for companies trying to stay compliant, with a particular focus on small to medium-sized enterprises (SMES).

Adam Marshall, director general of the BCC, said: “If thegovernmentwantsits‘global Britain’ vision to become a reality, it is time to tackle the huge costs and complexities of the UK tax system, which sap away time and resources that could be better spent raising business productivity.

“HMRC must be given both resources and a clear remit to focus more on supporting, rather than pursuing and punishing, small and mediumsized 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.”

The BCC has also called on the government to delay its Making Tax Digital project until the start of the 2020-21 financial year.

Richard Asquith, Avalara’s VP of global indirect tax, said: “This new requirement to record and report digitally will affect small businesses most. Approximately 500,000 still use non-compliant spreadsheets or manual recording. These enterprises will have to invest in compliant software, and become familiar with its processes.”