3 The administrative burden on companies
23. Complying with their Corporation Tax obligations
places a burden on companies. This includes keeping up to date
with legislation and ensuring their tax return is complete and
accurate. There is little research on the costs companies incur
although some other business taxes present a heavier burden for
taxpayers. The Department has been mapping the requirements of
Corporation Tax and other business tax processes to set a baseline
for tracking and reducing the costs of compliance. As a result
of that work, the Department has recently set a target to reduce
the administrative burden of dealing with the Department on the
various taxes by 10% over a five year period.[25]
24. Business and tax representative bodies have
identified the complexity of Corporation Tax as a concern, particularly
the computation of taxable profit. The Government launched a programme
of Corporation Tax reform August 2002, which has effectively now
run its course. This resulted in some simplification,
for example by removing an artificial distinction between trading
and investment companies. Other proposed changes have
not been implemented, however, either because they lacked the
support of business or because of the likely cost to the Exchequer.[26]
25. One such example was the proposal to reform the
'schedular system'. This adds complexity by requiring companies
to differentiate sources of income for tax purposes. It also results
in companies being unable to set losses from one source against
profits from another. To contain the cost, the Government proposed
a partial revision of the system. This was rejected by the business
community, who had favoured abolition, because they felt that
the benefits of partial reform would not justify the compliance
cost associated with any change.[27]
26. Companies selected for enquiry face the additional
burden of providing additional information and dealing with the
Department during the enquiry. The Department does not know the
cost of enquiries for the companies, but it incurs average costs
of around £1,100 per enquiry. In March 2006, the Department
announced that to help reduce the burden on companies it would
consult on a range of possible new 'compliance interventions',
which would be more flexible than the existing enquiry system.
Since 2002-03 it has reduced the time enquiries take, but full
enquiries still take on average over two years to complete, and
aspect enquiries over a year. Even when full enquiries do not
result in a change to the tax or profit assessment, they take
71 weeks on average. That average masks a range in Area averages
from 23 weeks to 115 weeks.[28]
27. The Department has recently piloted an internet-based
'shared electronic work-space' system for managing enquiries,
which has reduced enquiry times by 20% in one Area. This new approach
enables Area staff and company agents to share analysis and update
common records, making it easier for companies to provide additional
information that is requested. This reduced the time that agents
take in dealing with requests for information and the duplication
by staff of the work of agents. The Department is extending the
system to ten Areas in London from April 2006.[29]
25 Q 45; Progress towards a new relationship: how
HMRC is working to make life easier for business, HM Revenue
and Customs, March 2006, para 12 Back
26
C&AG's Report, para 3.14; Progress towards a new relationship:
how HMRC is working to make life easier for business, HM Revenue
and Customs, March 2006, para 2.7 Back
27
C&AG's Report, para 3.14; Q 10 Back
28
C&AG's Report, para 2.16, 3.10, 3.12, Figure 10; Progress
towards a new relationship: how HMRC is working to make life easier
for business, HM Revenue and Customs, March 2006, para 2.30 Back
29
Q 9 Back
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