HMRC defines a small business as one with annual sales not exceeding £20 million, which employs no more than 20 people. A micro business is one with sales up to £2 million and no more than 10 employees. 75% of small businesses do not employ anyone other than the owner(s).
The recommendations from the OTS cover five themes:
• providing simple step-by-step guidance about the key things a business needs to do in its early days to help things run smoothly • improving the operation of the PAYE system • implementation of HMRC’s Agents Strategy • improving the mechanics of the Corporation Tax return process • ensuring that tax changes are built on an understanding of business processes Under ‘improving the operation of the PAYE system’ If better quality information fed more quickly (and accurately) into the system, this would be helpful for taxpayers and could reduce queries to HMRC. In particular: • the current system does not handle the fluidity of the modern workplace very well, for example in relation to changes of job mid-month or individuals holding multiple jobs or concurrent employment and self- employment • system problems lead to significant costs for businesses, agents, employees, and HMRC itself. For example, there are around 350,000 duplicate employment records, and around 5% of returns are received late
System change would have upfront costs but should soon pay for itself, improving employer and taxpayer experience, and efficient tax collection.
A strategic focus on the PAYE system should be an HMRC priority to ensure effective implementation of improvements and system changes. In addition to ensuring that there is appropriate oversight of the system, the strategic focus should include: • ensuring that the commitments made by HMRC in the 2017 Post- Implementation Review of Real Time Information are prioritised and addressed • working with employers and their agents, to identify areas where the system is not working efficiently and to design and agree solutions
A roadmap should be drawn up to show the stages of progression and planned changes over the next 5 years.
A fresh review of areas where the PAYE/RTI system should be improved should be carried out, possibly by the OTS. The focus of this review would be to • consider the fit between the PAYE/RTI processes and modern work patterns • identify options to simplify and streamline the PAYE and RTI system • consider options to ensure that PAYE and RTI processes are ready to support future streamlining of the tax system Agents Agents’ role in supporting compliance with the tax system is recognised in HMRC’s 2014 Agent Strategy, which commits HMRC to a number of initiatives to help agents. Some of these have been completed, but HMRC has struggled to prioritise implementation of this strategy in the face of other demands. The principles set out in the Agent Strategy seem sound and reasonable: they include enabling agents to see the same information as their clients and carry out any tax transaction their client wishes them to do. The challenge lies in implementation.
The OTS’s recommendations are intended to encourage consistent implementation of the strategy, to ensure that agents are able to support clients in complying with tax at minimum cost.
HMRC should appoint a senior official to oversee and prioritise implementation of the Agent Strategy The focus of this role should include ensuring that agent needs are built into new systems; developing constructive engagement with the profession, to ensure that agents feel listened to and understood; as well as working with HMRC officials to increase their understanding of the role of agents.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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