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ICAEW calls for an end to ‘culture of constant change’ in tax

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Start-up and small businesses are struggling to cope with constant changes to the tax system and their frustration with government is growing, according to the Institute of Chartered Accountants in England and Wales.

In its submission to George Osborne ahead of next week’s Budget, the professional body called for an end to ‘the culture of constant change’ in tax.

‘While half of our business members have seen progress on the UK’s tax competitiveness, the instability in tax policymaking will undermine future confidence. The 2012 Finance Act was the longest ever and the 2013 Finance Bill is not far behind. Year after year, businesses must wrestle with new taxes, changing tax rates, new payroll or reporting systems and changing HMRC requirements,’ it said.

Michael Izza, ICAEW chief executive, told the chancellor: ‘Tax policy must evolve to meet modern needs and will always be tweaked to reflect political purposes. Some of these tax reforms, like the ten-fold increase in the annual investment allowance – which our research suggests one in five production sector businesses will take advantage of – are welcome. But while some change is vital, too much change hampers growth, competitiveness and job creation.’

The ICAEW called on the government to:

  • relax reporting requirements for real time information;
  • postpone the introduction of cash accounting for small businesses;
  • boost HMRC resource to help businesses navigate the ‘complex, ever-changing tax system’;
  • transform HMRC into an ‘effective credit control department’ to help manage the UK’s public finances;
  • improve the effectiveness of the proposed anti-avoidance measures by providing greater clarity on the implementation of the general anti-abuse rule;
  • ensure that the limit on income tax reliefs is ‘targeted at serial tax avoiders’ rather than struggling small businesses; and
  • postpone and revise the new rules on taxation of residential property transactions.

The Office for Tax Simplification needs to be properly resourced, the ICAEW said. ‘It should adopt a “one in two out” policy on tax legislation which is consistent with the government’s deregulatory agenda so that it results in real simplification.’