Conclusions and Recommendations
1. Businesses have to register separately
for each tax, and provide the same information, which duplicates
effort for them and the Department.
To conform with international best practice, the Department should
introduce a single registration system. Registration should also
be available online with appropriate validation checks to facilitate
accurate completion of the form.
2. Only 20% of businesses currently register
online for VAT and 25% for PAYE. Online
registration is easier and cheaper for businesses and the Department.
In Australia, 96% of businesses register online for a business
tax number and 85% of registrations with Companies House are conducted
online in the UK. To increase the take up of online registration
the Department should advertise the benefits to businesses, for
example on the Business Link website.
3. Businesses have to use different reference
numbers for each tax in their contacts with the Department.
The Department plans to introduce a "customer index"
to link its data on taxpayers, but this will not help businesses
to simplify their tax affairs. It should introduce a unique identifier
to make it easier for businesses to deal with the Department,
and to provide a basis for linking services to businesses across
the Department and, in due course, across government.
4. The Department does not have readily available
data on the extent to which different groups of taxpayers meet
their obligations. As a result, it is
poorly placed to assess priorities, and the costs and benefits
of action to improve compliance. The Department should analyse
the compliance record of different taxpayer groups and of the
track record of individual businesses so it can target its work
and assess its effects.
5. 61% of new businesses file their PAYE/National
Insurance returns on time, compared to 80% of the business population
as a whole. Rates for filing other tax
forms on time are also lower among new businesses. The Australian
Tax Office has concentrated on helping new businesses with inexperienced
owners who are least likely to understand their tax, leading to
improvements in compliance levels. In targeting its efforts to
increase compliance, the Department should give due weight to
the level of risk associated with new businesses.
6. Nearly 50% businesses do not pay PAYE/National
Insurance contributions on time. The Department
cannot impose a penalty or interest for late monthly payments
of PAYE/National Insurance contributions during the year. It can
do so only on balances due at the end of the tax year. Unlike
some other taxes, the Department is also unable to impose penalties
on businesses that register late for PAYE. It should seek powers
to remedy this situation.
7. The Department's guidance requires an average
reading age of at least 16 or 17 years to understand it, but over
5 million adults have literacy skills well below this level.
The Department should make its guidance easier to understand by
using plain English and improving the layout.
8. Workshops and seminars giving advice on
tax obligations do not run to full capacity and only around 8%
of newly registered businesses attend.
There is a high rate of late cancellations. The Department needs
to make it easier for new businesses to obtain the advice they
need. It should:
- explore alternative methods
of providing workshops and seminars to increase take up, including
online and outside normal working hours;
- make its website easier to use; and
- work closely with the organisations that new
businesses consult for business advice to provide help through
those channels.
9. The Department operates two helplines for
the newly self employed, one for new employers and seven more
covering different taxes that all businesses can contact.
Businesses have to contact different helplines for advice on different
taxes. It should work towards a one stop telephone system to cover
all taxes. The Department needs to develop the technical and operational
capability to give helpline staff access to taxpayers' computer
records and to route enquiries to advisers with the requisite
expertise.
10. Only around one half of small businesses
are aware of the different schemes available to simplify the tax
requirements for small businesses. If
all those eligible took advantage of just two of the schemes they
would save at least £50 million a year. The number of different
schemes and how they can be used in combination makes it difficult
for businesses to decide whether they are beneficial. To improve
take up, the Department should advertise more widely the financial
benefits to businesses of using them. It should also assess the
costs and benefits of introducing a single simplified VAT scheme.
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