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The warning the Forum of Private Business follows the group's latest survey which revealed that tax administration has become the main bureaucratic barrier to doing business for the UK's small firms – forming £5.1 billion of their annual £16.8 billion red tape bill.
VAT
At a meeting of the Joint VAT Consultative Committee last year, the Forum's tax adviser Andrew Needham said he was astounded when he was told that a relatively simple change to email alerts to inform business owners of a change to the deadline for accepting VAT cheque payments would take six months to implement because of procedural restrictions – too late to warn them in time. Fortunately, following political pressure, the changes were made.
The latest attack comes in the wake of recent Treasury sub-committee report into the ‘administration and effectiveness of HMRC', which blasted its poor levels of service and led Chairman Mike Clasper to publicly apologise,
Mr Needham said that problems were widespread. He said: "For example, businesses can be selected for what is called ‘extended verification' before being registered for VAT. Their forms are sent to a specialist team in Cardiff and the process is supposed to take 50 days, but I know of at least one case that was sent in September 2009.
"About 18 per cent of applications are selected for extended verification – so one in five are taken out of the normal system and placed in one where it takes a minimum of 50 days to process them.
"Often forms go back and forth continually when there are minor issues, with little common sense employed. There are an awful lot of business owners who are in no way involved in fraud or anything dodgy that nevertheless have their VAT registrations delayed."
Unanswered calls
Despite the apparent inefficiency of its online communications and email services, the sub-committee also found evidence of significant failings in HMRC's call handling abilities.
The finding follows figures from the National Audit Office (NAO) in January 2010 which showed that 44 million calls to the taxman went unanswered in a single year, including many during busy tax return periods. In all, HMRC failed to pick up 43 per cent of the 103 million calls it received in 2008-2009.
Mr Needham said: "That's beyond pathetic. In fairness, they are trying and things have improved since then but still there are around one in three calls are not being picked up, and when they there's no guarantee you will get a coherent answer.
"There's such a lack of planning – they knew, for example, that electronic VAT returns were being introduced so why no staff training or automated systems were put in place is mystifying."
Overhaul
As part of a root-and-branch overhaul of tax system to free small firms to grow and create jobs the Forum wants HMRC's service to be made quicker and more efficient, with much-improved communication and simplification of its online procedures.
The group is also calling for major reforms to PAYE – with the sub-committee reporting that many of the unanswered calls related to National Insurance (NI) and PAYE changes – and to the treatment of customers in line with its own customer charter.
In particular, there are concerns that HMRC's sector-by-sector clampdown on tax avoidance is unfairly focusing on small firms rather than large companies – the real culprits – because they are seen a easy targets. The Treasury sub-committee noted that one area in which HMRC is strong is tax collection.
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A recent survey carried out by the Forum suggests that, surprisingly, business owners would be willing to pay even more in tax in exchange for a simplified system that saves them money in the long run.
Small business owner, Pat Cobham, of Cobham Day Ltd in Liverpool, is particularly frustrated at changes making the administration of PAYE more difficult and believes HMRC's targeted investigations are unfair.
She said: "Once again HMRC are hitting the little guys. Small businesses are struggling to keep their heads above water and what does HMRC do to help? They introduce yet another raft of penalties. Late monthly PAYE payments now attract penalties at a time when cash flow for small businesses is the worst it has been in 20 years. In the good old days tax inspectors actually tried to help the tax-paying public by providing advice. They used to be called the Civil Service. We now get no service at all - we are just battered by rising compliance costs."
The Treasury sub-committee has recommended fifty measures to improve the service. (See also: 'Considerable dissatisfaction' with HMRC - Shout99, Aug 2011)
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Susie Hughes © Shout99 2011
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