A review of the government’s response to OTS report on simplifying tax for smaller businesses
20 January 2020
Ahead of all upcoming changes taking place from the start of the new tax year in April 2020, many payroll professionals will be wondering how the government’s response to the Office of Tax Simplification’s (OTS) report on simplifying everyday tax for smaller businesses will be incorporated into legislation and also hoping that this will make the complex area of tax more straight forward.
The response from HM Treasury, published in November 2019, accepted the majority of recommendations and considered any it did not wholly reject. In a letter addressed to the OTS, MP Jesse Norman thanked the department for their report and advised that officials would update them on any updates to the progress on the extra eighteen recommendations that were laid out in addition to the below. This is because the government is dedicated to ensuring the UK is an attractive place for business and entrepreneurship.
- Recommendation: the government should provide small businesses with a package of start-up guidance which advises of the key actions to take, with tax as the primary focus.
Response: this will be considered by the government. The government understands how important it is to help small businesses, not just to meet tax obligations but so that they can grow and prosper. HMRC already provides a range of support resources, inclusive of webinars and videos, tax helplines and written guidance. More can be done though and the cross government ‘Start a Business’ service community has published step-by-step guides to setting up a business. Ongoing work will continue to enhance the guidance available for new business set-ups.
- Recommendation: A strategic focus on the PAYE system should be a HMRC priority to ensure effective implementation of improvements and system changes.
Response: accepted by the government. HMRC is committed to improving PAYE and RTI, as this can equate to cost savings and give a better experience for customers, employers and agents. A post-implementation review of RTI took place in 2017 and HMRC is in the process of implementing the findings. A new regime ownership model will be introduced which gives clear accountability for ensuring that changes to processes are delivered, embedded and evaluated on their effectiveness.
- Recommendation: A fresh review of areas where the PAYE/RTI system should be improved should be carried out, possibly by the OTS.
Response: this will be considered by the government. HMRC will work alongside OTS to establish the best time to review PAYE, by the OTS or otherwise, and also look at other priority areas for identifying improvements of the tax system.
- Recommendation: HMRC should appoint a senior official to oversee and prioritise implementation of the Agent Strategy.
Response: HMRC has appointed a senior official to oversee and provide leadership on the Agent Strategy.
- Recommendation: HMRC should routinely build agent awareness and needs into system design and improvement and its related guidance.
Response: accepted by the government. The senior official appointed as per previous recommendation will be tasked with ensuring constructive engagement with the agent profession, to strengthen listening and ensure the role and needs of agents are understood and incorporated into the development of new systems.
- Recommendation: HMRC should work with partners, i.e. Companies House, to develop digital options to help smaller companies prepare accounts and complete tax returns, including an additional accounts template that is easy to use and acceptable to HMRC and other departments.
Response: this will be considered by the government. HMRC officials are investigating, along with Companies House, the best way to achieve a simpler return process for businesses.
- Recommendation: HMRC should simplify the corporation tax online return process as part of any future extension of Making Tax Digital to corporation tax, so that, as with the online income tax process, taxpayers only see the pages and information relevant to them and have pop-up information and help screens at key points.
Response: this will be considered by the government. HMRC will continue to take advantage of digital tools to reduce the complexity small businesses feel in preparing accounts and corporation tax returns. The OTS highlight the potential for simplification provided by any future extension of Making Tax Digital to corporation tax and this will be considered before implementation.
- Recommendation: HMRC should explore ways to reduce the number of companies having to file two tax returns to cover first accounting periods that are very slightly longer than 12 months.
Response: this will be considered by the government. HMRC realises there is a problem when a company draws up a set of initial accounts that cover a period over a year. HMRC will consider if it is possible to mitigate this without causing wider difficulties to the CT system from changing the maximum length of a tax year.
- Recommendation: HMRC should map major customer journeys for small businesses across tax regimes, to develop a programme of change to streamline the small business experience of the tax system.
Response: accepted by the government. The small business customer journeys HMRC has already mapped have resulted in a range of ideas in development to improve the experience of HMRC services. HMRC’s continuing programme of work will include mapping further small business journeys so that in time all major journeys will be covered.
- Recommendation: HMRC should review tax payment processes across core taxes and regimes, with a view to aligning and streamlining them.
Response: accepted by the government. HMRC will align and streamline the payment processes across different taxes. HMRC has made organisational changes that are supporting a programme of work to do this, working to a payment strategy delivering a consistent and straightforward set of HMRC payments processes.
The CIPP welcomes the fact that the government has accepted the majority of the key points raised by the report compiled by the OTS. The CIPP hopes that the responses to the recommendations help to reduce some of the complication faced by smaller employers and their agents and looks forward to hearing further details on progress.
If you have any recent experiences as an agent of a small business that you would like to share, please contact Samantha Mann, CIPP senior policy and research officer through [email protected].
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