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This document provides you with information and an overview of the digital support HM Revenue and Customs (HMRC) provides to you as a small business, and sets out plans for the next phase of our digital transformation.
Throughout this document there are links to the products and services described.
2. Introduction from Jim Harra
As a small business, you are one of over 5 million in the UK, ranging from self-employed individuals to companies employing up to 20 staff with a turnover up to £10 million. Small businesses represent 98% of all UK businesses, employing 10 million people, meaning that you play a crucial role in the UK economy and one we want to support.
Over the coming years HMRC will transform the way in which we interact with you and your tax agent, if you have one, bringing the tax system into the digital age. It will integrate tax into day-to-day record keeping, allowing for easier and more regular transfer of information to HMRC rather than you having to complete an onerous tax return annually. It will provide a clearer view of your tax position in-year and greater certainty that you’re getting things right, with prompts and nudges built in to prevent errors.
While this digital transformation offers many opportunities, I do recognise that the continued transition to digital will be challenging for some and that is why HMRC is continually developing how we support small businesses to get the right information, to understand and meet your tax obligations and to sustain and grow. This brochure sets out how we are putting small businesses at the heart of our transformation of tax administration, and enhancing our relationship with you. It highlights the products and services we currently offer and our future plans.
Jim Harra, Director General for Customer Strategy and Tax Design, HMRC.
3. Our current offer to small business
Over the last 5 years HMRC has transformed the way we provide help and support to small businesses, using digital channels to reach more businesses – up from 170,000 in 2010 to 2011, to 1.2 million businesses in 2015 to 2016. The quality and flexibility of our digital help and support for businesses and tax agents has been widely recognised, winning consecutive LUCA awards from the Institute of Certified Bookkeepers for small business support services in 2015 and 2016.
Here is a summary of the services that we currently offer.
3.1 Business Tax Account
Nearly three million business users have accessed the online business tax account and benefitted from a tailored product that brings everything your small business needs to register, file and pay online together in one place. The service provides an overview of your current position for the main taxes and also has help and support built in.
The Business Tax Account started as ‘Your Tax Account’ and was tested and used by small businesses in 2014. Your comments and feedback helped us to improve on the original product, leading to our current service which has been positively received by businesses and regularly achieves an 80% user satisfaction rating.
From April 2017, businesses who need a little extra time to pay their tax bill will be able to apply quickly and easily through their account.
3.2 Live and recorded webinars
We offer a rolling programme of live and recorded webinars for small businesses on a wide range of subjects, including a cross-government series which give you more than just the HMRC perspective. Attending a webinar is time- and cost-effective as you can attend via a laptop/PC or any internet connected device wherever is convenient for you.
Our webinars have proved increasingly popular – in 2014 28,000 small businesses attended and this was up to over 100,000 in 2015 to 2016, with satisfaction ratings of 94%.
E-Learning helps you to learn about specific tax issues across a range of topics, including setting up and running your own business and self-employed business expenses. E-Learning provides you with an alternative to video tutorials and are often a lot more interactive and engaging.
3.4 Outbound email Service
HMRC offers an outbound email service for businesses. By registering for them, you will receive important reminders and links to online help and support. The email content is tailored, based on the taxes your business is registered for, e.g. self-employed, employers, VAT, etc. You can sign up via your online account to receive emails to support you through your business life events.
More than 1.8 million businesses receive regular updates and information via email from HMRC.
3.5 Social media - Twitter and YouTube
The HMRC YouTube channel provides you with support and guidance in bite-sized chunks and on a broad range of subjects. We often share our videos and signpost useful tools and guidance via our Twitter accounts, @HMRCgovuk and @HMRCbusiness.
Supporting our continued transition from paper to digital, HMRC has added even more features to our iForms which makes it easier and quicker for your business to transact with us. These iForms are accessible on mobile devices and offer the ability for you to track the progress of your form in your business tax account.
3.7 Help sheets and guides
We produce a variety of help sheets and guides on key topics to help run a business, which include:
3.8 Record keeping apps
We maintain a list of record keeping apps that can help your small business. These have been developed by software suppliers in consultation with HMRC. We continue to work closely with the software industry to ensure that they produce a range of apps and software products that meet the needs of small businesses and enable you to deal with your taxes digitally.
3.9 Ready reckoner online tool
This ready reckoner tool helps new small businesses plan how much you need to set aside each month to make your tax payments. This tool is very popular and was accessed over 40,000 times during 2015 to 2016.
3.10 Debit or credit card online
HMRC offers the ability to pay tax using a debit or credit card, saving you time and providing more convenience. You can use this method of tax payment for a number of services and we constantly review its usability.
3.11 Tools for agents
Tax agents can play an important role in supporting small businesses and the self-employed to get their tax right. Therefore, as well as being able to access the wide range of help and support that is available to businesses, HMRC also provides tailored help and support for agents:
- Agents Working Together has now moved to an online function, providing agents with the opportunity to ask questions, share thoughts and obtain information without having to leave their offices
- Agent Update provides regular updates, news and guidance to agents and can be accessed via the link or can be subscribed to
- Talking Points are weekly online meetings that provide agents with the opportunity to discuss a range of subjects with HMRC experts
- Tax Agent Toolkits have been designed to help tax agents and advisers avoid errors in their clients’ returns - new agents receive notification of the toolkit when they first register with HMRC
3.12 Engagement, collaboration and feedback
HMRC engages with, listens to and acts upon feedback from you to reduce complexity and the burdens placed on your business. The government has given HMRC a target to reduce the annual cost to business of tax administration by £400 million by the end of this Parliament.
We do this in a number of ways:
Every year we survey small businesses to find out more about their perceptions of tax administration and the service we deliver. Last year the majority of customers reported a good experience with HMRC, but also highlighted areas where we can improve.
Read the full results from the 2015 survey.
Working closely with the Office of Tax Simplification
The Office of Tax Simplification is working in a number of areas to tackle complexity and simplify tax, including reviewing alignment between tax and National Insurance Contributions, the taxation of small corporates and VAT.
The Administrative Burdens Advisory Board
The Administrative Burdens Advisory Board (ABAB) was established in 2006 to bring a real business perspective to HMRC and has already helped HMRC to deliver over half a billion pounds in administrative burden savings for business. It is an independent board that brings together people with business knowledge and expertise across a variety of professions with the primary goal to ‘make a noticeable difference’ for small businesses. ABAB are currently working with HMRC to ensure the new Making Tax Digital changes meet the needs of small businesses.
4. Our future offer to small businesses
Over the next few years we will continue to improve and build on the products and services that we are able to offer your small business. Here is a summary of what we have done and are working on, and links to further information.
4.1 Making Tax Digital
HMRC has recognised that we need to do more to help businesses and improve our services, which is why we are transforming the tax system through Making Tax Digital.
It brings together and builds on the digital services we currently offer to you and will transform the administration of tax, making it easier for you to get your tax right. By 2020 most small businesses will be using apps and software to keep your business records and report information to HMRC. You will be able to see all of your tax affairs in near real-time, in one place, with overpayments offset against liabilities and built-in prompts and nudges eliminating common errors, giving you greater certainty that you’ve got your tax right first time.
The government recognises that Making Tax Digital represents a significant change for some, and HMRC is committed to delivering these changes in a way that works for all involved with the tax system. This is why we are piloting these changes over 2017, before we phase in their introduction from April 2018. Additionally, we will ensure there is free software for businesses with the most straightforward tax affairs and assistance to help businesses with the transition.
4.2 Customer service
HMRC has significantly improved our front line services to you by investing in 800 additional staff. We are now delivering an improved telephone service, consistently answering 90% of calls with an average speed of answer under 5 minutes (April 2016 to October 2016) and are looking at ways to improve further.
In response to an Office of Tax Simplification recommendation, we will be offering longer opening hours and a 7-day a week service on tax and tax credit phone lines and web chat.
We now also offer you alternative ways of contacting us, such as social media.
4.3 Working with partners to help businesses to grow
HMRC is committed to supporting businesses, not just to meet your tax obligations but to help your business grow and prosper.
We have been working with a range of partner organisations who most frequently advise small businesses to increase our level of engagement. This includes Growth Hubs in England, banks, universities, tax agents, professional education providers, and government colleagues, such as the Intellectual Property Office, UK Export Finance, UKTI and the devolved administrations.
HMRC has provided these organisations with support packs for small businesses at different stages of their development and regularly promoted material from the Department for International Trade.
4.4 Supporting entrepreneurs
The government continues to encourage entrepreneurship. Entrepreneurs’ relief will be extended to longer term external investors in unlisted companies. This will provide a 10% rate of Capital gains tax for investors on gains accrued when selling shares in unlisted companies after holding them for at least three years.
From April 2017 the government is introducing new allowances for the first £1,000 of trading income and the first £1,000 of property income. If your income is below the level of the allowance you will no longer need to declare or pay income tax on that income. If your income is above the allowance you can choose simply to deduct the relevant allowance from your gross income instead of calculating and deducting your exact expenses.
4.5 Finance and reliefs
A new online system will be in place from 2017 to make it easier to access the Enterprise Investment Scheme and Seed Enterprise Investment Scheme. These, together with the Venture Capital Trust Scheme, encourage investment in small, early stage unlisted trading companies, by providing income tax and capital gains tax reliefs to individual investors.
Since January 2016 the Annual Investment Allowance has been permanently set at £200,000, supporting businesses investing in new plant or machinery, helping you grow your business by providing a 100% allowance for the full cost of qualifying plant and machinery in the year of purchase.
There are a range of Research and Development Reliefs which enable small companies to claim a generous tax relief or a payable credit for the costs of a research and development project. In 2014 to 2015, the scheme provided over £1 billion in tax relief support to smaller businesses. In 2015 we introduced an advance assurance scheme for small companies making their first claim.
During 2015 and 2016 the Employment Allowance took 680,000 employers out of employer National Insurance Contributions (NICs). The allowance rose to £3000 from April 2016 which will take a further 90,000 out of employer NICs and over 1 million employers have benefited from this measure, encouraging more businesses to take on their first employee. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.
Since April 2015 employees under 21 don’t attract employer NICs, and from April 2016, apprentices under 25 years of age are also exempt. This benefits you as you will now no longer have to pay these contributions and it encourages and enables you to employ more young staff.
From April 2018, the government will abolish Class 2 NICs. This will reduce the NICs paid by 3.4 million self-employed individuals by an average of £134 a year and will end an outdated and complex feature of the NICs system.
4.6 Simplifying Tax
There are 4.8 million self-employed people who pay income tax rather than corporation tax on their profits of their business.
In 2013, the government introduced cash basis accounting – enabling the smallest self-employed businesses to calculate their profits for tax on a cash in cash out basis rather than using accruals accounts.
That fits with the way most owners of the smallest businesses manage their businesses and it was taken up by over 1 million businesses in the first year.
From April 2017 the current threshold for cash basis will be increased from a turnover of £83,000 to £150,000, enabling almost 135,000 more businesses to benefit. At the same time, cash basis will be extended to landlords.
The government has also consulted on further simplifications to tax for the smallest businesses, and announced changes to remove the need to divide expenditure into capital and revenue for tax purposes when using the cash basis.This will simplify the calculation of taxable profits when using the cash basis.
4.7 Business rates
We are transforming business rates billing and collection. By 2022, local authority business rate systems will be linked to HMRC digital tax accounts so that you can manage your rates bills in one place alongside other taxes. As a first step, the government will work with local authorities across England to standardise business rate bills and ensure ratepayers have the option to receive and pay bills online by April 2017.
The government recognises that business rates represent a high fixed cost for small businesses and the business rates review document sets out the government’s initiatives to improve things for your business.
Find information on current business rates processes.
4.8 Company Accounts and Corporation Tax
HMRC and Companies House have delivered the Company Accounts and Tax Online (CATO) service so that the majority of small companies can file accounts with HMRC and Companies House at the same time.
From 2017 incorporated businesses will benefit from a cut in Corporation Tax rates down to 19%. The UK has the lowest Corporation Tax rate in the G20.
4.9 Business helpline and online forums for business and agents
We are developing a dedicated phone line and online forum for new businesses and self-employed individuals to get help and support about filing and paying your taxes for the first time.
The small business forum will be a support channel allowing you to ask questions and have them answered by HMRC advisers. As with webinars and on social media, the queries will be general (non customer specific) and we won’t be asking for your personal details.
We have been piloting a digital ‘Working Together’ agents’ forum during late 2016 and hope to expand this offering in 2017. This allows agents to raise operational and procedural issues. Both forums will support the transition to using digital services.
HMRC are committed to continually reviewing and improving the service that we offer to our customers.
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