The administrative burden of UK tax regulation is costing over £5 billion a year, according to KPMG. It has counted all of the form-filling duties – and concluded that British businesses are at least better off than their Dutch and Danish counterparts.
The research was undertaken for HM Revenue & Customs (HMRC) with a view to cutting the red tape. It found that 85 form-filling obligations account for 86% of total costs; but a further 2,607 obligations make up the remainder.
While most obligations only apply to a small number of businesses, HMRC acknowledged in a statement today that, "collectively these can cause irritation and contribute to an impression that the tax system is complex and difficult to understand."
The costs are divided by KPMG: 41% are attributed to internal costs (i.e. the costs of activities that a business undertakes to be compliant); 49% to external costs (i.e. the costs of working with intermediaries – experts like KPMG itself); and 9% to acquisition costs (the non-time costs incurred by business).
Unsurprisingly, KPMG also found that intermediaries are used more when tax regulation is complicated and affects many businesses. And the biggest single activity business has to carry out is information gathering. Finding the underlying data behind their accounting systems is more costly than anything else, it seems.
Chancellor Gordon Brown announced in his Budget on 22nd March that HMRC will tackle both aspects of the burden on business, by reducing the burden on businesses of dealing with HMRC's forms and returns by at least 10% over five years. The burden of dealing with HMRC's audits and inspections will also be cut by 10% over three years and at least 15% over five years.
A new Administrative Burden Advisory Board, to be chaired by Teresa Graham, non-executive director of four businesses and Deputy Chair of the Better Regulation Commission, is also being set up to work with HMRC on dealing with the complexity of the tax system.
Financial Secretary of the Treasury, John Healy MP, said today: "HMRC will continue to work closely with business in future to further minimise administrative burdens."
