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Small business tax administration to come under review

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The Treasury has asked the Office of Tax Simplification (OTS) to look at how the system of tax administration for smaller businesses works.

It is the next area on the list to do for the OTS.

Previous OTS reports suggested that tax administration is a source of uncertainty and complexity for many smaller firms.

The new review will examine ways of reducing the administrative burdens of the current system and of simplifying the ways in which HM Revenue and Customs and small businesses interact with each other.

This will involve examining small businesses’ experience of tax administration and their contact with HMRC at key stages of the annual tax cycle.

The review will also investigate the tax administration processes involved in starting and growing a new business.

The OTS is drafting terms of reference and will shortly start gathering initial evidence before reporting ahead of Budget 2012.

John Whiting, tax director for the OTS, said: “A clear message from the first stage of our small business project was that a big area of difficulty for small businesses was the administration that surrounds the tax system. I’m delighted that the Chancellor has endorsed our report and asked us to take it forward to the next stage.

“It’s clear that many small businesses are struggling under the administrative burdens imposed by the UK tax system.  We plan to set up surveys and more roadshows to really home in on what steps cause the most difficulties – and how the system can be improved, making it easier for businesses to get things right with the minimum of fuss.”