OTS on the money with its small business tax recommendations

The OTS report contains major recommendations in five areas and other important suggestions for improving HMRC processes.

Tina Riches, Chair of CIOT’s Owner Managed Business Sub-committee, said:

“The OTS is on the money with its recommendations to address the tax challenges faced by small businesses. Tax advisers that act for small businesses have been calling for change in a number of these areas for years. It is great that the OTS has picked up on many of them and is calling for action to be prioritised.”

On the recommendation that the Government should develop and offer small businesses a package of start-up guidance, Tina Riches said:

“Starting a new business can be daunting for individuals. Online guidance may be comprehensive, but appears often to be a vast black hole for new business owners, who may not know what they are supposed to know or what to look for. Having a single place to visit and find links to the key areas they need would improve their chances of success and reduce the risk of defaulting.

“One of the most important areas is around removing the barriers for those professionals that are genuinely trying to help small businesses. Many businesses realise that their business can be more successful if they concentrate on running the business and outsource specialist areas. This includes using a tax adviser to assist with their tax compliance.”

The CIOT also supports the OTS suggestion that HMRC appoint a senior official to oversee and prioritise implementation of the Agent Strategy and a separate OTS suggestion that HMRC should routinely build agent awareness and needs into system design and improvement and its related guidance. Tina Riches said:

“Too often systems are designed with only taxpayers in mind and not their agent. Some parts of the tax system exclude agents, others have the agent access as a poorly designed add-on and other parts allow anyone with client authorisation to act, even where they do not have the skills to do so. This whole area has been under the HMRC microscope for years, but requires more resources and HMRC’s full attention so that small businesses can be appropriately supported.”

The CIOT supports the OTS’s recommendation that HMRC takes a look at PAYE and RTI and their interaction. This is a significant area for small businesses. It also supports exploring ways to reduce the number of companies having to file two tax returns to cover first accounting periods that are slightly longer than 12 months; this will help prevent mistakes and make it easier to understand. The current process often requires tax returns to be made for different periods to the accounting periods, which can be counter-intuitive, says the CIOT.

Notes for editors

1. The Simplifying everyday tax for smaller businesses report can be found here. The report was commissioned by the Chancellor of the Exchequer and the scoping review was published in July 2018  

Small businesses are a major part of the UK economy. They make up over 99 per cent of all the 5.7 million businesses in the UK, employ 12.9 million people and pay over £205 billion in tax.

The report explores for the first time the tax challenges faced by businesses by reference to the stages a developing small business might go through in its engagement with the tax system. What has emerged are several long-standing concerns which now, as the economy and the world of work continue to evolve, it is especially important that the government prioritises.

The report contains major recommendations in five areas and other smaller suggestions for improving HMRC processes.