Is HMRC confusion causing higher compliance costs?
Small businesses have been hit hardest by the introduction of Real Time Information (RTI), auto-enrolment, Employment Allowance and other advice on sector-specific regulation changes. Indeed, the Forum of Private Business estimates that the total cost of compliance now exceeds £19.2bn—a 4% increase on 2013. For small business—those employing fewer than nine employees—this works out at a cost of £164 per employee.
It could be argued that part, or even all, of the rise is caused by confusing and conflicting information from HMRC.
Take a recent example that Liberty Accounts uncovered, in relation to Employment Allowance.
Employment Allowance, available from 6th April 2014, allows employers to reduce the amount of National Insurance Contributions they pay for their employees by up to £2,000.
The question arose as to whether, if you hadn’t advised HMRC that the employee was eligible to claim the allowance, you could retrospectively claim.
One might imagine that the answer should be straightforward. That is unless if you’ve used the HMRC website before. If you have, you will know that finding the right information can be both tricky and time-consuming.
What you will eventually find is:
On page 2 it states:
The amount of allowance you can claim for each payment period must be the same as your employer Class 1 NICs liability for the same period—subject to the £2,000 Employment Allowance annual maximum.
Yet on page 4 of the same document it states:
You start claiming the allowance on 31 July (August will be the first month you can use the allowance against your employer Class 1 NICs liability).
If your claim had started at the beginning of the tax year 6 April (rather than July) your claim to date would be £1,500 (the total allowance that you could claim for May, June and July).
It seems that on the one hand HMRC is saying the allowance must be the same as the liability for the period, which would indicate that you can’t make retrospective claims, but then contradicts itself in the same document.
Indeed, if you read further down on page 4, you will see that not only can you make retrospective claims in the same PAYE year but you can in fact make a claim up to four years (from the tax year 2014 to 2015 only) after the end of the tax year in which the allowance applies.
As HMRC puts more and more pressure on businesses (and software suppliers) to comply with new legislation shouldn’t it avoid confusing and conflicting information? Help us to help you HMRC!