The taxman’s complex online process is just one reason the UK’s tax system is not fit for purpose, according to The Forum of Private Business.
The business group has told a treasury sub-committee that HMRC is failing in its aim to create a more efficient tax system because it is bogged down in bureaucracy, including complex and unwieldy online procedures.
The warning follows the Forum’s latest Cost of Compliance Referendum survey, which reveals 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.
At a meeting of the Joint VAT Consultative Committee last year, the Forum’s tax adviser Andrew Needham was astounded when he was told that a relatively simple change to e-mail 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.
Speaking in the wake of the 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. “For example, businesses can be selected for what is called ‘extended verification’ before being registered for VAT, said Mr Needham, of VAT Specialists Ltd.
He continued: “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% 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.” He concluded: “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.”
Despite the apparent inefficiency of its online communications and e-mail 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% of the 103 million calls it received in 2008-2009.
“That’s beyond pathetic,” added Mr Needham. “In fairness, they are trying and things have improved since then but still there are around one in three calls not being picked up, and when they are 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.”
As part of a root-and-branch overhaul of the 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.