Payroll admin burden on small businesses a drag on UK plc

The CIOT makes the call in its submission to a review of the competitiveness of tax administration in the UK being conducted by the Office of Tax Simplification (OTS)1. As part of a drive to generate ideas for a more competitive UK tax system, the OTS’ review asked businesses, taxpayers and their advisers to submit their thoughts on how administration of taxes can be improved to produce an environment in which UK businesses and taxpayers can thrive.

CIOT Employment Taxes Sub-Committee Chairman, Colin Ben-Nathan, commented:

“The competitiveness of a tax system is crucial for businesses and taxpayers who operate within its jurisdiction. Of course part of this is about rates, but survey after survey has found that, for many, administrative burdens are at least as important. If a particular tax is complex to administer more time and effort must be devoted to processing it, forsaking resources which could otherwise be used more effectively elsewhere.

“Last year the CIOT polled its members to gather views on the effect Pay-As-You-Earn Real Time Information (RTI) is having on employers and the challenges they face in having to report immediately to HMRC on pay paid to their employees. Over half of the respondents replied that small employers should be allowed to opt out of RTI reporting, saying their clients found it too prescriptive, time consuming, and even unworkable.

“On making payroll reporting more competitive, we suggest that Government allows small businesses to report employees’ pay monthly to HMRC, rather than on or before each payment is made, so as to reduce the administrative burden2. This approach would certainly chime with a key theme of the proposed Small Business, Enterprise and Employment Bill3 which the Government has said is designed to ensure red tape that affects small business is frequently reviewed to ensure that regulations are either cut or otherwise remain  justified.”  

The CIOT has also queried how HMRC and the Department of Work and Pensions (DWP) use RTI data. The Institute asks whether it is really the case in the pilots on Universal Credit (UC) that the data is being used instantaneously by HMRC/DWP to impact on the UC payment being made, i.e. would less burdensome monthly reporting not do pretty much the same job? On the other hand, if the Government is capable of using RTI data immediately, why are HMRC’s systems apparently not yet able to use RTI data to adjust employees’ and pensioners’ tax codes in real time to ensure that they are paying the right amount of tax in-year?

The CIOT expresses support in its submission for the OTS’ recommendations on simplifying employee benefits and expenses, and also backs the current OTS review of the taxation of termination payments and living accommodation.

Colin Ben-Nathan added:                                                                        

“The CIOT fully agrees that making the UK tax system more competitive and easier to administer will increase businesses’ certainty and confidence in managing their obligations, and reduce time and money spent on administration. This in turn will boost  the UK’s economic growth.  No doubt the OTS will make a number of sensible proposals on what can be done, but  key will be for the Government to demonstrate its resolve by taking those proposals seriously and driving through changes which really make a difference. Actions speak louder than words!”



Notes to editors:


1.       The Office for Tax Simplification’s (OTS) Competitiveness review: initial thoughts and call for evidence can be accessed here. The submission of the Chartered Institute of Taxation to the review can be accessed here.

2.       After 6 April 2014, HMRC required small businesses to use the Real Time Information (RTI) system to report payroll information on or before each payday. HMRC removed a temporary easement for small employers and replaced it with a further temporary easement for micro-employers (employing nine or less staff) enabling them to report PAYE information on or before the last pay date of each month until April 2016.

3.       The Small Business, Enterprise and Employment Bill 2014-15 can be read in full here; explanatory notes can be accessed here.

4.       The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.