188体育

1. Background and objectives

HMRC commissioned IFF Research to conduct research to update elements of the Standard Cost Model (SCM), and to gather agents and businesses views more generally on the administrative burden associated with complying with tax obligations. Specifically, the objectives of the research were:

• to collect quantifiable data about 7 specific tax obligations across 3 tax areas: Employer-administered tax, VAT and Income Tax for Businesses, covering the administrative burden of completing the obligation, the time taken to comply with each obligation and the way the administrative burden has changed over time
• to understand external costs to businesses by capturing information on the role of agents in helping different categories of businesses to comply with specific obligations and the associated cost
• to understand the use of digital or online filing, including software costs and processes involved in complying with tax obligations

HMRC chose 7 obligations as the focus for the research. The 7 obligations were in the following policy areas: Employer-administered tax, VAT, and Income Tax for Businesses:

• Reporting Expenses and Benefits in Kind (P11D submission)
• taxing employee Expenses and Benefits in Kind through payroll (Payrolling)
• Reporting Class 1A NICs on Benefits in Kind through a P11D(b) form (P11D and Payrolling)
• issuing VAT invoices
• keeping and maintaining a VAT account
• completing a self-employment trade and supplementary pages return
• making payments on account of income tax (including Class 4 National Insurance contributions)

2. Method and sample

There were 3 stages to the research:

• qualitative in-depth interviews with 5 businesses and 2 tax agents to inform the design of the surveys, conducted between 3 February 2022 and 21 February 2022
• quantitative research consisting of 2 telephone surveys: a survey of 1,001 businesses and a survey of 200 tax agents, conducted between 26 May 2022 and 8 July 2022
• qualitative in-depth interviews with 40 businesses that had agreed to be contacted to take part in a follow-up interview during the survey, conducted between 27 July 2022 and 22 August 2022

Businesses and agents that took part in the survey were asked about the administrative burden for up to 2 tax obligations. The obligations were purposively selected to ensure there was sufficient coverage across all obligations.

The size category and definitions used in the research were:

• nano businesses 鈥� 0 employees
• micro businesses 鈥� one to 9 employees
• small businesses 鈥� 10 to 49 employees
• medium businesses 鈥� 50 to 249 employees
• large businesses 鈥� 250 or more employees

3. Main findings

3.1 Time and costs associated with HMRC tax obligations

Both the business and agent surveys collected data on the time and costs associated with compliance for each obligation. It was clear from the high proportion of businesses answering with 鈥榙on鈥檛 know鈥� when asked how much time they spend on the different tax obligations, that businesses generally find it difficult to provide this information.

The survey and qualitative findings revealed that some of the processes involved are embedded in their business as usual activities, so the times provided were very much an estimate for some. In particular, for VAT invoices, the qualitative research revealed that several businesses only issue VAT invoices, regardless of whether the product or service is subject to VAT. For those using computer software the VAT would be automatically calculated and so differentiating between the time spent issuing invoices generally versus the time spent dealing with any element specifically required for VAT was difficult.

The most time-consuming obligations for both businesses and agents were completing a self-employment trade and supplementary pages return and keeping and maintaining a VAT account. Meanwhile, issuing VAT invoices took the least amount of time for both businesses and agents.

Similarly, businesses found it difficult to apportion the tax agent cost to the specific obligation. The qualitative research revealed that often businesses receive an overall bill from their tax agent which is not itemised by tax obligation.

3.2 Businesses鈥� use of agents

The majority of businesses (68%) had used an agent for at least some of their tax administration activities. Nano businesses were significantly less likely than businesses overall to report using a tax agent (59%).

The majority of agents dealt with businesses of different sizes. The most common client groups were nano, micro and small sized businesses.

The most common services tax agents provide to business clients were (agents gave multiple responses) preparing accounts, dealing with HMRC queries, contacting HMRC in order to deal with problems, filing returns, dealing with HMRC鈥檚 requests for information and inspections, calculating tax payable and providing advice on general taxation.

3.3 Use of computer software and administrative burden

Most businesses found it easy to prepare and provide information for the tax obligations explored in this research. All obligations were considered easy by at least three-quarters of businesses 聽(ranging from 77% to 90%), apart from reporting expenses and Benefits in Kind through a P11D submission which was deemed easy by 69% of businesses.

Businesses were asked to consider whether the administrative burden of complying with the obligations had changed over the last 3 years. The majority of businesses had not seen an increase in the burden of complying with these tax obligations over the last 3 years.

The use of computer software to prepare or file information varied across the obligations. Businesses were most likely to report using software for keeping and maintaining a VAT account (66%) and least likely for making payments on account of income tax (39%).

Most businesses said that using software had not had an impact on the cost of complying with the tax obligations discussed in the survey (61%). However, 22% believed the software had increased the cost of complying. The qualitative research revealed this to be due to the cost of the software itself and the increased cost of tax agent time explaining how to use it. However, businesses generally felt that costs would reduce in the longer term as they become more proficient with using the software. 聽

Businesses were generally positive about the impact the software had on the time spent on tax obligations. The few businesses that felt the software had increased costs or the time spent (as a result of learning to use the software) felt that this would only be for the short-term. These findings were supported by the agent survey findings in that most tax agents felt that the use of software had reduced the time taken to deal with their clients鈥� obligations. Those that felt it had either made no difference or had increased the time taken said this was largely in relation to providing advice to clients.