VAT simplification could boost UK small businesses
The Office of Tax Simplification is set to publish a report that will set out a variety of ways that the current VAT system can be updated and simplified.
By reducing the complexity of the system, it should benefit small businesses as a layer of administrative responsibility should be cut down or removed entirely.
According to the Chair of its Board, Angela Knight CBE, the system of tax is showing its age, having existed for more than 40 years.
The tax is awash with layers of complexity reflecting its evolution over the last 45 years and aspects of the Purchase Tax that VAT replaced,” she explained.
Small businesses should also benefit from the simplified system, as a number of administrative requirements will be altered.
Among the core recommendations to come from the Office of Tax Simplification will be that the Government examines the current approach to the VAT registration threshold, alongside setting out a potential future direction for it.
At the same time, calls will also be made for HMRC to continue its efforts regarding improving the clarity of guidance that is available regarding tax.
The national chairman of the Federation of Small Businesses, Mike Cherry, said that complying with VAT obligations is “massively time consuming for small firms” and welcomed the new proposals.
He said that small firms should be focused on growth, rather than “navigating an array of different VAT schemes and an inconsistent list of exemptions as long as your arm”.
The FSB wants to see “substantial clarification” that should help small firms to focus on the more important aspects of business, including direct sales, research and development and exploring the possibility of entering new markets.
Businesses that are struggling with VAT or PAYE arrears, or unpaid tax, should seek advice at the earliest opportunity.
Alongside tackling the threat of bailiffs or payment demands from HMRC, Time to Pay schemes can help to ensure that businesses can overcome the issues they face.
This should also help to reduce the likelihood of insolvency or the need for other financial management or restructuring processes.
By Phil Smith