House of Commons - Public Accounts

Select Committee on Public Accounts Sixty-Fifth Report

3 Making it easier for businesses to comply

22. The integration of HM Customs and Excise and the Inland Revenue in a new Department in 2005 was designed to achieve improvements in customer service and reduce their compliance costs, as well improve the Department's effectiveness and efficiency. In particular customers were to benefit from a unified tax service, with the Department structuring its work around customers and functions rather than taxes, and adopting a more joined-up approach in its use of information.[40]

The compliance costs for businesses

23. Preparing the information and computations to complete VAT and Company Tax returns can be a lengthy and costly process for businesses. The Department's research indicates the administrative burden of preparing and filing VAT returns costs the 1.8 million VAT registered businesses £310 million a year, or 30% of the total burden of dealing with VAT. On Corporation Tax, the burden of filing returns and self assessment computations is estimated to cost the 1.8 million companies required to file £330 million a year, accounting for half the total burden of dealing with Corporation Tax.[41]

24. In 2006, the Chancellor introduced a target to reduce by at least 10% over five years, the administrative burdens on businesses of dealing with Departmental forms and returns. If the Department achieved a 10% reduction in the burdens associated with filing returns, the savings for individual business would be small—around £17 per business on average for a VAT return and £19 for a Company Tax return and Corporation Tax computation. The target is an overall target that is not specific to particular taxes or stages of the tax process. The Department expected to exceed the 10% target in the burdens associated with filing VAT and Company Tax returns.[42]

Improving the service to businesses

25. The Department considered it could reduce the burden further by improving the help, advice and guidance it gives to businesses. It had, for example, introduced Client Relationship Managers for businesses within the Large Business Service to provide them with a personal and tailored customer service and manage the Department's relationship for both direct and indirect taxes. It had targeted education and support to highlight frequently made errors on the VAT return and advise on how to correct and avoid them. However, the information and advice services available online and through helplines did not always fully meet businesses' and stakeholders' needs or expectations.. The Department was exploring options to improve its website in phases by 2008, for example by improving the search facility so that customers can quickly find the information they need.[43]

26. Businesses have suggested that the Department could also reduce the compliance burden by simplifying the tax returns and systems. The Department had introduced a short Company Tax return for small businesses. It recognised it could make other improvements such as providing receipts for sole traders submitting tax returns, and aligning the various dates for payment of Corporation Tax, filing the tax return and filing accounts with Companies House. This improvement would enable smaller companies to submit accounts to government once and make tax payments at the same time as, rather than in advance of, filing the return. Following consultations with businesses, it had decided against removing the requirement to file a tax return for the smallest companies if they have no tax liability.[44]

27. The Department collects a lot of basic information about a business which is common to both taxes. Because it operates separate systems for each tax businesses often have to provide the same information more than once. The Department accepted it should aim to collect the basic information it requires from businesses once, to cover all taxes.[45]

28. The Department accepted that improving how it holds and shares information about businesses across the taxes would assist in developing a single financial account for each business, covering all its taxes, and that it should provide a single point of contact for business covering all taxes.[46] Joining up its information in this way would also help in targeting its compliance activities. It was moving towards more centralised risk assessment with improved risk tools so that it had more structured, consistent, intelligent information drawn from different tax systems.[47] This change would enable it to give a lighter touch to businesses with a good compliance record. It would also be able to intervene in different ways to help businesses comply rather than always undertake more costly enquiries.[48]

29. The Department acknowledged that it had a long way to go in making it easier for businesses to comply and that it could learn from the experience of other tax authorities and the private sector.[49] It considered it needed to improve its understanding of the way in which customers wanted to do business with the Department.[50] The process of organisational change was continuing and most of the planned improvements in customer experience were unlikely to come into force before 2011.[51]

40 Q 101; Financing Britain's Future-Review of the Revenue Departments, HM Treasury, Cm 6163, paras 1.5, 1.17-1.18 Back



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