An increasingly complex tax system is costing UK businesses an estimated £15.4 billion a year in compliance, according to a report from the National Audit Office (NAO).

HMRC’s cost of collecting tax has risen by £563 million over the past five years due to added complexity in the system plus investments in staff and IT.

During this period, the government’s tax yield rose by £113 billion in real terms, said the NAO.

HMRC estimates that compliant UK businesses incur costs of £15.4 billion each year in meeting around 2,500 obligations across 27 policy areas. These include £6.6 billion of fees paid to agents, accountants and other intermediaries, £4.5 billion of acquisition costs, such as software, and £4.3 billion of internal costs.

The report warned that HMRC is underestimating these costs as it does not take into account all taxpayer obligations.

Frank Haskew, Head of Taxation, at the Institute of Chartered Accountants in England and Wales (ICAEW), said:

‘This report highlights how the UK’s increasingly complicated tax system is saddling businesses and HMRC with extra burdens and costs, which are growing in real terms. The report also substantiates our concern that the cost to businesses of complying with their tax obligations is likely to be understated.’

Internet link: NAO ICAEW

The government has introduced a package of support that it says will help the alcohol sector to grow.

From 1 February, draught relief has increased to knock 1p off duty on draught products whilst small producer relief – a measure to encourage craft brewers to innovate – is becoming more generous.

Together these tax cuts are worth £85 million and are tailored to support the alcohol sector to innovate and grow, according to HM Treasury.

The increase to draught relief, first announced at Autumn Budget, will affect around three in five of all alcoholic drinks sold in pubs, and represents the first duty cut on a pint of beer in 10 years.

As announced at the Autumn Budget, alcohol duty was also increased in line with inflation. The Treasury says this helps secure public finances and helps to fund the investment needed to grow the economy and fund public services.

Exchequer Secretary to the Treasury, James Murray, said:

‘Our pubs and brewers are an essential part the fabric of the UK and our brilliant high streets. Through draught relief, small producer relief, and expanding market access for smaller brewers, we will help boost sector growth and deliver our Plan for Change to put more money in working people’s pockets.’

Internet link: HM Treasury

The overwhelming majority of businesses say the rise in employers’ NICs will force them to change their plans, according to research by the British Chambers of Commerce (BCC).

With under six weeks until the NICs rise comes in, 82% of firms say the tax hike will cause them to rethink. In addition, 58% of surveyed businesses say it will impact recruitment plans, and 54% that it will affect their prices.

Meanwhile, more than a third of firms suggest investment and day-to-day operations will be impacted.

Alex Veitch, Director of Policy at the British Chambers of Commerce said:

‘The clock is ticking down to the NICs rise, and firms are already telling us they are sitting on a powder keg of costs.

‘The government has pledged to retain the NICs tax position through the life of this parliament, but our new evidence should give pause for thought. We need the government to publish a wider tax roadmap for business, setting out the direction of travel for costs like NICs and business rates.

‘Business rate reform must be an urgent priority, creating a system that incentives investment. Getting on with planning and skills reforms will also remove blockers to growth.’

Internet link: BCC

HMRC will reduce late payment and repayment interest rates from 25 February following the cut in the base rate.

The Bank of England cut the base rate to 4.5% on 6 February, triggering a 0.25% cut in HMRC interest rates which are pegged to the base rate.

From 25 February, the late payment interest rate will be cut to 7.0% from 7.25%.

The repayment interest rate will be cut to 3.5% from 3.75% from 25 February.

HMRC late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments dropped to 5.5% from 5.75% from 17 February, a week earlier than the main late payment rate change.

Internet link: GOV.UK

The government has launched a consultation on plans for the rollout of electronic invoicing (e-invoicing) in the UK.

The 12-week consultation is being jointly conducted by HMRC and the Department of Business and Trade (DBT) and will consider whether to make e-invoicing mandatory for businesses in the UK.

E-invoicing is the digital exchange of invoice information directly between buyers and suppliers.

The government says this could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money.

It usually results in faster business to business payments, leading to improved cash flow and less paperwork, the government adds.

The 34-question consultation can be completed online and once the 12-week feedback session closes.

James Murray, Exchequer Secretary to the Treasury said:

‘As part of the Prime Minister’s Plan for Change, we have begun our work to transform the UK’s tax system into one that is focused on helping businesses and the economy to grow.

‘E-invoicing simplifies processes, reduces errors and helps businesses to get paid faster. By cutting paperwork and freeing up valuable time and money, it will help improve firms’ productivity and their ability to grow and succeed.’

Internet link: HMRC press release