HMRC does not understand small business tax concerns
16 Sep 2019
Small business taxpayers feel that HMRC does not understand their needs and are worried that any mistakes will be perceived as intentional and result in penalties
16 Sep 2019
The latest HMRC research into the relationship between small business customers and the taxman has found that for some small business customers managing tax was described as relatively complex and requiring a level of expertise which they may not have.
Anxiety about making errors was exacerbated by the perception that HMRC was likely to penalise customers. This was described as originating from past experiences or from HMRC communications which could be interpreted as ‘accusatory’.
Many customers felt that HMRC did not understand the experiences of small business customers. This heightened the perceived need to explain their situation, and financial difficulties, over the phone to evade suspicion of any deliberate wrong doing.
One respondent, a co-owner of a food retailer, who used the phone helpline, said: ‘I was falling behind on payments and I realised the only way HMRC would believe me and not punish me is if I rang up and explained and asked how I could pay what I owed.'
For instance, communications from HMRC were often associated with sector-specific language, complex clauses and in some instances, a tone perceived as threatening or accusatory. This meant that taxpayers believed that HMRC would be more likely to issue penalties for errors, rather than provide them with support or encouragement.
Customers were often anxious that payments had not been received by HMRC and called the helpline for confirmation. This is because payments take between 48 and 72 hours to process and HMRC is unable to provide confirmation before this.
Some businesses admitted that their internal record keeping systems were not always organised - resulting in the need to contact HMRC for help. This was exacerbated by sharing responsibility for some liabilities with agents.
The reasons for contacting HMRC tended to relate to progress chasing, deciphering language or terms, sometimes describing HMRC content and communications as ‘ambiguous’, and checking expenses, concerning corporation tax and VAT.
The research focused on small businesses that had contacted HMRC when they could have found the information online. The report stated: ‘Although the information is available via other platforms, “customers” contact HMRC helpline due to low awareness of online functions including the Business Tax Account; due to difficulty navigating HMRC’s online systems and processes or because of a lack of clarity of HMRC communications’.
There was criticism of HMRC’s website with small business respondents citing difficulty with navigating online content, confusion in applying written guidance and a lack of clarity on the status of queries or cases. They also said they were ‘unable to find answers to specific or “quick” questions’. The dominance of text guidance, overly technical or sector specific language, and limited use of visual or videos to support understanding of tax rules, was also criticised.
Another area of concern was the lack of confirmation or updates on payments, submission deadlines or investigations. This will be exacerbated as the new Making Tax Digital for VAT reporting system does not include confirmation statements from HMRC when a VAT submission is made. These are only issued by software companies, which are not used by all small businesses, many of whom do not use a bespoke accounting software.
Although the nature of VAT means that taxpayers interact with HMRC every quarter, there were also criticisms of the time it takes to deal with enquiries and investigations. The report stated that those taxpayers ‘who were waiting for a rebate or the results of a case investigation often became anxious when they hadn’t received an update. Despite being told they would need to wait “28 days” some became concerned there would be additional actions they were unaware of after this point’.
For those who had missed a payment, there was a perception that they would need to contact HMRC to explain why. This was even the case among those who had access to an online account.
The research also found that there was limited awareness of HMRC’s Business Tax Account (BTA), which provides a summary of the individual businesses’ tax liability.
'I think I’ve used the BTA but it feels like there are too many ways to access HMRC,’ said one respondent, who owned his own business. ‘It’s like they've had three goes at creating a site and left two that don't work properly behind. What I really want is one place to manage all my liabilities and to be sure that it’s the only one.'
HMRC is driving more interaction with its website in a wider push to digitise tax but the report highlighted a number of areas where the online experience needs to improve to encourage more online usage.
The report highlighted areas where HMRC needed to take action to improve the relationship between the tax authority and taxpayers, including reframing the relationship between HMRC and taxpayers, to address concerns about not understanding obligations and fear of penalties; and simplifying the user experience on the website; adapt and develop touchpoints as customers as often communicated to via many different channel which can be hard to monitor and can cause difficulties in managing obligations.
The qualitative research was conducted in 2018 by Kantar Public and included focus groups and in-depth interviews with small businesses with turnover below £10m.
By Sara White