WE ALL know that sinking feeling when nobody notices our fabulous new suit or radical haircut. If you recently returned home from the hairdresser only to be greeted by the sound of silence, remember you are not alone. The taxman probably feels the same.
In April last year, the Inland Revenue and HM Customs and Excise were merged amid much fanfare. The shiny new HMRC was set up to be a one-stop shop to help to ease the path of businesses and individuals paying taxes, whether indirectly or directly.
In a consultation paper on the administrative burden put on small businesses by the taxman, published just before the merger, Sir David Varney, who became its executive chairman, wrote: “My vision for HMRC is one in which small businesses will know where they stand, with simple information on what they owe, what they have already paid and what they need to pay available when and in the form they need it.”
But research published today shows that the Revenue’s efforts have so far not been radical enough to turn the heads of small business owners. Nearly 80 per cent of directors, financial directors and senior directors of the 500 SMEs questioned by Tenon Forum, a think-tank set up by Tenon, the accountant, said that they had noticed no difference at all in their relationship with the taxman since the merger last year.
The Revenue can draw some comfort from the 8 per cent of directors who have noticed a positive change in their relationship but that is overshadowed by the 9 per cent who feel their relationship with the Revenue has deteriorated.
Civil servants will be heartened that their new improved department is striking a chord with newly established businesses. Only one in five companies established for ten years or more had noticed a difference since the creation of the Revenue, while more than one in three of companies trading for five years or less reported that the change had affected them.
But some of this awareness might be attributed to younger businesses having to keep a close eye on cashflow while more mature businesses may let professionals take care of their accounts.
The Revenue says that it needs more time to fulfil its goals. A spokesman said: “We have already delivered on some of the priorities business identified for us, and have plans to do much more. We have delivered a short self-assessment form for the smallest businesses, and have removed payment of tax credits via employers.”
Andrew Hubbard, director of taxation at Tenon, said: “It would have been nice if the HMRC had found some opportunities to show taxpayers that its creation has been a good thing, but it has only been a year. If people still have not noticed a difference in three years’ time, that will be a problem.”
Nearly 90 per cent of SMEs questioned about the Revenue said that they wanted to be consulted about significant changes to the tax system, while 88 per cent said that it needed to take into consideration the specific needs of SMEs.
But the Revenue says that it has. “HMRC has consulted small business widely on their expectations for a future relationship,” it said.
But business groups are sceptical about the Revenue’s consultation process. Matthew Knowles, of the Federation of Small Businesses, said: “It is a bit unfair to expect HMRC to change dramatically in 12 months. Having said that, it needs to improve its business consultation processes quickly. There does appear to be a distinct lack of understanding of how businesses work among HMRC officials.”
