The Office of Tax Simplification has presented recommendations to the Chancellor to ease administrative tax burdens on smaller businesses, especially micro business. A review released by the OTS, which was launched by the Chancellor and Exchequer Secretary on 20th July 2010, provides administrative and technical solutions to help smaller businesses deal with their obligations to HM Revenue & Customs.
Micro businesses with a turnover below £30,000 should operate with simplified taxation, according to the OTS. Although HMRC have already made some positive changes to small business tax, the OTS advise improving communication between business and HMRC, which would include two way emails. The improvements would also include a helpline dedicated to small businesses.
Typically, smaller businesses are sole traders who use cash accounts. Claiming business expenses is a time consuming task which is very often for very small amounts. The OTS recommends a simplified payments and receipts method of accounting, rather than full accounts. Flat rate expenses should also be increased so that smaller businesses don’t have to spend time claiming complex allowances. A small business accountancy is very often the preferred choice by companies, as the administration is dealt with by the accountant, minimising a tax bill in a legitimate manner.
John Whiting, The Office of Tax Simplification’s Tax Director, said:
“We have spent a lot of time gathering the views of businesses and their advisers about the tax system from the sharp end. That has led us to recommend a range of practical changes to the way the system runs that will help businesses with their everyday tax affairs- and will help HMRC as well.”