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Published on 12 December 2018

Office of Tax Simplification: 2nd Report on the Business Life Cycle

LITRG has responded to the Office for Tax Simplification’s (OTS) second report on the Business Life Cycle, where we focus on the areas we consider affect small, unrepresented businesses which generally have low-profit margins. As part of our response we raise concerns that HMRC’s communications strategy for Making Tax Digital for VAT will be too late to enable many small, unrepresented businesses to be ready before April 2019. We would like HMRC to provide free basic software for small businesses who will need to comply with the Making Tax Digital for VAT programme and that HMRC’s Basic Payroll Tool be re-designed to produce a payslip as this would simplify the payroll process. 


Although we are generally supportive of HMRC’s digital agenda, they have a duty to ensure that there are good and effective non-digital methods available to allow small businesses to participate in their tax affairs with confidence. 

We recommend that HMRC’s tailored information about a business be used to provide a personalised annual timetable of when payments and filing of returns are due for all the taxes a business is registered for. This should result in fewer errors as businesses could check when their many different payment dates and returns for quarterly VAT, monthly/quarterly PAYE, corporation tax and income tax are due. We also recommend that the search function on the GOV.UK website is improved to enable business-owners, who may not be able to afford professional advice, to find the relevant tax information they need quickly. Often a search will result in a high number of wide and diverging results, which is off-putting. It is likely to discourage people, who are already busy running their businesses, from spending time looking through all the identified results to find the one that is most appropriate.

Although it was not included as part of the scope of the OTS’s report we consider it essential that the consequences of introducing changes in one area of the tax system are not looked at in isolation and in particular the interaction between tax and benefits should always be examined and steps taken to mitigate any unintended consequences. An example of where simplification would benefit self-employed universal credit claimants would be the full alignment of the cash basis used for tax purposes with the cash basis used by the Department for Work and Pensions. By aligning these two methods it would simplify the system for some self-employed claimants as these claimants would only need to understand one set of rules, which should reduce errors on both universal credit monthly claims and self assessment tax returns.

The LITRG response can be found here: Office of Tax Simplification: 2nd Report on the Business Life Cycle – LITRG response

Claire Thackaberry

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