Understanding experiences of dealing with Corporation Tax

Question 1

1.  Executive summary

Accepted Answer

1.1 Research background and methodology

The purpose of this research is to identify and inform improvements to Corporation Tax administrative processes. It explores small and medium-sized enterprises’ (SMEs) and tax agents’ experiences of managing Corporation Tax, and views on potential changes to reduce administrative burdens and improve the customer journey for SMEs.

HMRC commissioned Verian, formerly Kantar Public, to conduct qualitative and quantitative research, undertaken in two stages. Ten deliberative group discussions involving 40 SMEs and 9 agents, and 6 in-depth interviews with SMEs, were conducted between September and November 2022. Findings from the qualitative phase informed development of a quantitative survey, conducted with 1,000 SMEs by telephone between August and September 2023. A detailed breakdown of the research sample is provided in the technical annex.

1.2 Perceptions of Corporation Tax and agent use

Across the whole population of SMEs in both phases, more reported finding Corporation Tax easy to deal with than those who found it difficult. In the survey, overall, half (53%) of SMEs thought that dealing with the administrative requirements of Corporation Tax was ‘easy’, and 19% felt it was difficult. A number of independent factors contributed to the perceived difficulty of Corporation Tax. For example, smaller, newer and less confident SMEs were more likely to find related administration difficult and perceive their Corporation Tax matters to be complex.

In general, Corporation Tax was considered to be a complex tax, particularly when the business claimed reliefs or allowances to reduce their liability. In the qualitative discussions, some SMEs expressed a perception that Corporation Tax requirements lacked clarity and changed frequently, which reduced their confidence and increased their fear of getting things wrong and consequently their reliance on a tax agent to support them.

While a quarter of SMEs (23%) reported dealing with Corporation Tax wholly in house, slightly more than half (57%) relied on their agent to ‘a great extent’. Qualitative discussions highlighted that use of an agent was not always directly linked with relieving the perceived difficulties of Corporation Tax, and was instead driven by a perception of greater efficiency and time savings. SMEs used agents primarily due to the complexity of Corporation Tax computations and their own lack of expertise. However, SMEs noted some downsides to using an agent, including cost, a loss of control and the need to share sensitive business information with a third party.

1.3 Customer experiences of managing Corporation Tax obligations

In the qualitative phase, participants discussed a typical Corporation Tax ‘journey’, from understanding requirements, to record keeping, calculating and preparing figures, checking accounts prior to submission, making payments and settlements, and finally resolving issues. SMEs interviewed were generally happy with the process of managing Corporation Tax. However, across both phases of the research, SMEs reported that pain points occurred to some extent at all stages and were most common when needing to understand requirements or resolve issues.

Understanding the complex requirements of Corporation Tax, including reliefs and allowances, was the most common reason SMEs found it difficult (39% of those that found some difficulty), which was linked to the reasons they used an agent. In qualitative discussions, SMEs expressed that agents were ‘worthwhile’ given the perceived complexities and were seen as a more efficient source from which to get guidance, than HMRC.

Among specific Corporation Tax related tasks, making amendments and completing and filing the CT600 were most often considered difficult (by 29% and 19% of SMEs respectively). In the qualitative discussions, some SMEs reported that the CT600 form was too complex and daunting, including by SMEs that used an agent to help them prepare it.

SMEs were divided on whether the cost and time to deal with Corporation Tax was reasonable, but two-thirds (66%) did not feel the administrative burden had a negative impact on growth. However, the qualitative discussions did reveal some negative impacts that were financial in nature. For example, some SMEs felt that the time taken to deal with Corporation Tax was valuable time spent away from running the business. Furthermore, some of the uncertainty around calculations hampered budgeting or decision making, as did receiving timely repayments.

1.4 Channel use in interactions with HMRC

Most SMEs self-served (59%) or used a combination of self-serve (for example, accessing guidance on GOV.UK, HMRC webchat) and assisted serve (for example, telephone, email) channels (38%) to resolve queries related to Corporation Tax. HMRC’s digital services were generally well regarded, for example, 70% rated the Business Tax Account positively, but there was some negative sentiment towards HMRC’s general telephone helpline.

Both agents and SMEs felt that HMRC was hard to reach, so resolving Corporation Tax queries was at times considered challenging. However, in both phases there was limited awareness of the Corporation Tax dedicated helpline. SMEs felt that increased clarity of information, for example, simplified, user friendly guidance would enable a greater level of self-service, where they could resolve issues or queries with limited support from agents or HMRC advisors.

1.5 Improvements to the process of managing Corporation Tax

The improvements SMEs would most value were around providing clearer and more accessible guidance and reducing bureaucracy (10% of SMEs mentioned each of these spontaneously in the survey). Although, in the qualitative discussions it was found that simplifying adjustments and streamlining reliefs and allowances was not entirely favoured by SMEs due to fears that they would end up paying more tax.

In the qualitative phase, SMEs expressed a desire for information from HMRC to be clear, simple and non-technical to help reduce perceptions of complexity, and that HMRC should differentiate between policy and legal language, using layman’s terms where possible and providing examples and illustrations.

Enhanced digitalisation of processes was welcomed by SMEs, for example, submitting documents via a secure portal (81% thought it would be beneficial) and receiving routine communications via a secure portal (70% thought it would be beneficial). SMEs saw value in having a range of contact points available to them and responded positively to the idea of guidance on which contact points can deal with a specific type of issue. However, they felt that raising awareness about the types of support available and when to use different contact points would be required.

Question 2

2.  Introduction

Accepted Answer

This section outlines the research background and purpose, methodology, and key considerations for interpreting the findings presented.

2.1 Research background

Corporation Tax is charged on the taxable profits and gains of companies and other entities such as unincorporated associations. Total receipts from all Corporation Taxes for 2022 to 2023 amounted to £84.7 billion - making up around one-tenth of all revenues collected by HMRC ^{[footnote 1]}.

To meet Corporation Tax obligations, organisations in scope must meet a number of obligations including accurate record keeping, filing company tax returns, and paying any resulting Corporation Tax liability. Calculating taxable profits can be complicated, especially for businesses with complex operations, multiple revenue streams, or international operations. Failure to comply with requirements can result in penalties.

Various tax reliefs and allowances are available for businesses to reduce the amount of Corporation Tax payable. However, navigating reliefs and allowances can be challenging for some businesses, and may require specialist expertise.

2.1.1 Research objectives

The overarching aim of this research was to identify improvements to Corporation Tax that could reduce costs and administrative burdens and improve the customer journey for small and medium-sized enterprises.

The research objectives were to:

identify the most prevalent pain points SMEs experience when managing Corporation Tax
assess the administrative burdens associated with Corporation Tax related processes
identify potential changes to Corporation Tax related processes that could have a positive impact

2.2 Research methodology

2.2.1 Phase 1: qualitative research

The exploratory phase of this research involved qualitative group discussions with SMEs and agents and in-depth interviews with SMEs to understand perceptions of incorporation, capture pain points and elicit suggestions that might ease the administration of Corporation Tax.

Fieldwork was conducted between September and November 2022, involving 10 group discussions (8 SME and 2 agent groups), each with between 4 and 6 participants, and 6 in-depth interviews with SMEs. Findings from the qualitative phase informed development of a survey to explore and quantify the administrative burdens, pain points and test reactions to proposed improvements to certain aspects of Corporation Tax administration.

2.2.2 Phase 2: quantitative research

The quantitative survey was conducted using Computer Assisted Telephone Interviewing (CATI). Sampling was based on a random probability approach designed to produce generalisable insights from a representative sample.

In total, 1,000 SMEs were interviewed. Fieldwork was conducted between August and September 2023. Interviews were completed with the person responsible for managing the business’ Corporation Tax obligations. Referrals to the business’ agent were not accepted. Interviews lasted around 22 minutes on average.

The questionnaire was designed collaboratively between HMRC and Verian, formerly Kantar Public. Questions were cognitively tested prior to fieldwork to assess SMEs’ understanding and interpretation. The survey was piloted to check the contact procedure and technical set up of the interview script.

Qualitative discussion guides and quantitative survey questions can be found in the technical annex.

2.3 Reporting notes

2.3.1 Qualitative findings

Verbatim quotes from the qualitative discussions are used throughout the report to bring findings to life. Quotes are attributed by ‘Business type (SME or agent), how the business managed Corporation Tax (if SME), size of business’ (for example ‘SME, use an agent, small’). The following definitions for size of business were used in the qualitative research:

‘nano’ or ‘micro’ was used for SMEs with between 0 and 10 employees
small was used for SMEs with between 11 and 50 employees and agents with between 0 and 50 employees
medium was used for SMEs or agents with between 51 and 250 employees

2.3.2 Quantitative findings

SMEs were in scope for the survey where they were registered for Corporation Tax, had between 0 and 250 employees (inclusive) and turnover of up to £36 million per annum. The population was skewed towards smaller businesses, but the sample design was disproportionate to ensure sufficient numbers of larger businesses for analysis. The following definitions for size of business were used in the quantitative research:

‘nano’ or ‘micro’ was used for SMEs with between 0 and 9 employees
small was used for SMEs with between 10 and 49 employees
medium was used for SMEs with between 50 and 250 employees

These bandings differed slightly from those used during the initial qualitative phase to align with standard bandings used in HMRC administrative data and comparable business surveys. However, they did not impact qualitative or quantitative analysis or findings. Details of the survey sample distribution can be found in the technical annex.

The following points should be considered when reading this report:

percentages for single-response questions do not always add up to exactly 100% and the sum of 2 or more percentages do not always equal the sum of the integers due to the effect of rounding
all subgroup differences reported are statistically significant to the 95% confidence level which means that we can be 95% confident that the differences observed are genuine and have not just occurred by chance
confidence intervals for the overall sample and by subgroup vary according to the number of respondents in each group (confidence intervals are reported in the technical annex)

All sections of this report draw on both qualitative and quantitative data to provide an overall picture of the findings. Survey findings are expressed in percentages, whereas findings from qualitative discussions have not been quantified. Findings from the qualitative research provide insights into the views, motivations and preferences of the SMEs and agents interviewed. They are not representative and generalisable to the target population in a statistical sense.

Question 3

3.  Perceptions at the point of incorporation

Accepted Answer

This section presents SMEs reasons for and routes to incorporation, as well as understanding of Corporation Tax requirements and disincorporation.

3.1 Reasons and routes to incorporation

SMEs in both phases incorporated for a range of reasons. Among SMEs surveyed, this was most commonly for limited liability protection (24%), to give their business a formal structure (11%) and to take advantage of a lower tax rate (10%), as shown in Figure 1 below. Qualitative interviews highlighted SMEs and agents’ views of incorporation including financial protection and business formality and structure.

“You feel a bit protected, in that, if it all goes to pot you’re not going to necessarily lose your house.” (SME, use an agent, small)

“I think some people think it sounds a bit more important if you’re a Limited company, rather than saying your name as a sole trader.” (Agent, small)

Figure 1: Factors that influenced business’ decision to incorporate (mentioned unprompted by 5% or more SMEs)

Factors	SMEs trading for less than 5 years
Limited liability protection	24%
To give the business a formal structure	11%
Pay a lower rate of tax	10%
Advised by an agent	9%
To increase credibility or the business’ professional image	9%
To separate personal and business assets	8%
To help the business grow	7%
To meet supplier criteria of certain contracts	6%
Don’t know	14%

Source: J1 What factors influenced your business’ decision to incorporate? Unweighted base = 349

In qualitative discussions, both agents and SMEs had a positive view of the incorporation process. It was seen as easy, and guidance was felt accessible and clear. Many SMEs thought incorporating was the ‘right thing to do’ but did so without seeking advice. Some did research online prior to deciding, others did not consider other options. Agents often had clients approach them who had already incorporated.

Some SMEs did take on board advice from their agent regarding their decision to incorporate. However, there was some feeling among SMEs that agents were motivated to recommend incorporation to benefit from higher fees. Some agents acknowledged that might be the case.

Agents discussed projected turnover and business plans with some SMEs when they were deciding to incorporate. Some agents said they would never recommend a new business incorporates without a solid need, such as risk mitigation, and instead would advise them to wait until the business had grown. SMEs, and agents themselves, recognised the role agents had in making SMEs aware of their obligations once incorporated.

3.2 Understanding of Corporation Tax requirements and disincorporation

Among SMEs surveyed, only a third (34%) of SMEs had a good understanding of the administrative requirements of Corporation Tax prior to incorporation, 42% had heard of the requirements but knew very little or nothing about them, and 24% were not familiar with the requirements at all.

Across the research, awareness of how a company disincorporates was low among SMEs and agents. In the survey, 1 in 10 (11%) of SMEs had considered disincorporation in the last 3 years, though among these, only 9% had a good understanding of the process. Of all SMEs surveyed, just over half (56%) were not familiar with how a company disincorporates, while 27% had heard about it but knew very little or nothing about it.

In the qualitative discussions, most agents said they had never advised a client to disincorporate. Among those that had, some felt the business involved had been misadvised by another agent, and that the fees they were paying outweighed any benefit of incorporation. Other agents had considered disincorporation appropriate for businesses that were becoming less profitable, but the amount of paperwork involved to disincorporate had put some businesses off.

Question 4

4.  Use of third parties to support Corporation Tax administration

Accepted Answer

This section explores SMEs use of agents and software to manage their Corporation Tax related tasks and administration.

4.1 Use of agents

Among all SMEs surveyed, nearly a quarter (23%) reported undertaking Corporation Tax related administration in house, including record keeping, preparing statements, making payments and seeking guidance. Around half (48%) did some of this work within the business, and outsourced the remainder, and just under a third outsourced all these activities to an agent (29%).

Larger SMEs were more likely to outsource at least some work, for example, those with at least 10 employees (88% compared with 77% of those with fewer than 10 employees) and those with turnover of more than £85,000 (86% compared with 69% of those with turnover of less than £85,000).

Among SMEs that participated in the qualitative research, use of an agent was not always directly linked with easing the difficulties in dealing with Corporation Tax. For some SMEs, agent use was driven by perceived efficiencies or value for money, or the fear of getting things wrong.

Over three-quarters (77%) of SMEs outsourced at least some Corporation Tax activities. These SMEs reported a high reliance on their agent, even where activities were only partially outsourced. Among SMEs that outsourced at least some activities, around three-quarters (73%, equivalent to 57% of all SMEs) relied on their agent ‘to a great extent’. One in 5 SMEs (20%) that outsourced at least some activities relied on their agent to ‘some extent’, while 6% relied on them ‘a little’.

In qualitative discussions, SMEs perceived some disadvantages to using an agent, including the cost and loss of control, which included the need to share sensitive business data. SMEs also expressed some discomfort in the extent to which they relied on their agent. Some SMEs felt they lack the knowledge and expertise to quality assure their agent’s work when dealing with their business’ sensitive financial data, contributing to a perceived lack of control.

“It feels like one of the biggest areas of the business where we’re most exposed to potential abuse. There’s a real gap between our understanding and what the expert puts together.” (SME, use an agent, small)

4.1.1 Tasks outsourced to agents

Among SMEs that outsourced at least some Corporation Tax related tasks to an agent, almost all relied on them to complete the CT600 (96%), perform calculations (94%) and prepare accounts (90%).

In the qualitative discussions, SMEs described the value of agents as a source of information about changes to tax requirements, and that this type of information was more easily sought from agents than HMRC. Almost three-quarters of SMEs that used an agent took their advice when dealing with HMRC requests (73%) or other advice, including on reliefs and allowances (72%). Figure 2 shows all services SMEs report being provided by agents.

Figure 2: Services provided by agents

Services	SMEs that outsource at least some tasks
Completed the Corporation Tax return	96%
Performed Corporation Tax calculations	94%
Preparing accounts (financial statements)	90%
Checked Corporation Tax return for errors	82%
Advise on HMRC information requests or compliance checks	73%
Other services or advice including advising on reliefs and allowances	72%
Record keeping (expenses or bookkeeping)	30%
Made Corporation Tax payments to HMRC	16%

Source: C2 In the last 12 months, which of the following services have you outsourced in relation to Corporation Tax? Unweighted base = 820

4.2 Use of software

Among all SMEs surveyed, 72% used software to maintain and manage day to day Corporation Tax record keeping. Businesses were more likely to use software where they had:

at least 1 employee (81% compared with 60% of single owner operators)
turnover of more than £85,000 (83% compared with 62% of those with turnover less than £85,000)
felt confident in dealing with Corporation Tax (77% compared with 64% of those that did not feel confident)
were claiming reliefs and allowances (82% compared with 65% of those not claiming any)

Where software was not used, it was most often because the business outsourced the work (32%), or because they did not feel it was needed (27%). Figure 3 shows reasons for not using software mentioned by at least 5% of SMEs that do not use software.

Figure 3: Reasons for not using software (mentioned unprompted by 5% or more SMEs)

Reasons	SMEs not using software
Outsource those Corporation Tax activities	32%
Do not feel the business requires it	27%
Cost prohibitive	12%
Do not want to learn to use a new system	9%
Requires significant change to accounting processes	7%

Source: I4 Why don’t you use software to maintain and manage day-to-day Corporation Tax record keeping? Unweighted base = 217

Software was generally viewed positively in qualitative discussions. Most SMEs felt that software allows for easier record keeping and calculation of accounting figures to pass over to an agent or populate their CT600 return directly. Some SMEs and agents noted that for new or inexperienced businesses, record keeping and using software can be a ‘steep learning curve’. Some agents described supporting clients to learn the process, and highlighted that software enables SMEs to keep better records. Agents also felt software speeds up the process of their work by allowing an easier and faster transfer of information from SMEs.

“If you’ve got the figures from the software, it’s simple. I just go onto the website.” (SME, mixed managed, small)

Question 5

5.  General perceptions of Corporation Tax

Accepted Answer

This section presents SMEs overall perceptions of Corporation Tax including the perceived complexity of their Corporation Tax matters, as well as ease of and confidence in dealing with the associated administration.

5.1 Ease and confidence of dealing with Corporation Tax

Overall, half (53%) of SMEs said that dealing with the administrative requirements of Corporation Tax was easy (they gave ‘ease’ a rating of 4 or 5 out of 5 where 1 was very difficult and 5 was very easy). One in 5 SMEs (19%) felt that Corporation Tax administration was difficult (they gave a rating of 1 or 2 out of 5).

SMEs more likely to perceive the administrative requirements of Corporation Tax difficult to deal with, tended to be smaller, newer and less confident, specifically:

single owner operators (27% compared with 13% of those with at least 1 employee)
with turnover of less than £85,000 (24% compared with 13% of those with turnover between £85,000 and £500,000)
had traded for 5 years or less (26% compared with 13% of those that had traded for more than 5 years)
not confident dealing with Corporation Tax (43% compared with 4% of those that were confident)
had little or no understanding of the Corporation Tax requirements before incorporation (34% compared with 9% of those that had a good understanding)

Overall, half of all SMEs (48%) said they were confident in dealing with Corporation Tax related matters (they rated their ‘confidence’ 4 or 5 out of 5 where 1 was not at all confident and 5 was very confident). Just under a third were not confident in dealing with Corporation Tax (29% rated their confidence 1 or 2 out of 5).

The qualitative discussions similarly found that a number of factors influenced SMEs’ experience of Corporation Tax, including their in house capability to deal with it, the age of the business, the complexity of the business, the size of the business and the extent to which they involved an agent.

“If it’s a barrier that affects us as tax professionals, a business owner would just have no chance as they’ve got no experience with it. It just pushes them to come to us.” (Agent, medium)

5.2 Complexity of business’ Corporation Tax matters

In the qualitative discussions, SMEs generally considered Corporation Tax to be a complex tax. In particular, businesses that claimed reliefs or allowances felt it was complex. These businesses were more likely to outsource Corporation Tax calculations to an agent. There was a perception among SMEs that Corporation Tax administrative requirements lacked clarity and changed frequently, which contributed to a lack of confidence and heavy reliance on agents.

“Do I understand the requirements and implications? I don’t, really, because I’m not an accountant.” (SME, own managed, nano)

In the survey, just over half (56%) of SMEs felt that their business’ Corporation Tax matters were ‘not complex at all’, while 30% said they were ‘somewhat complex’ and 10% felt they were ‘very complex’.

Certain subgroups of SMEs were more likely to perceive their Corporation Tax matters to be ‘very complex, including:

single owner operators (12% compared with 3% of businesses with 10 to 49 employees)
had turnover less than £10,000 (16% compared with 2% of those with turnover between £5million and £36million)
had traded for 5 years or less (13% compared with 6% of those that had traded for more than 5 years)
outsourced all Corporation Tax work (17% compared with 8% of those that did at least some tasks in house)
were not confident dealing with Corporation Tax (25% compared with 4% of those that were confident)

SMEs perceptions of the complexity of their Corporation Tax matters do not necessarily reflect an objective assessment of complexity. Qualitative discussions highlighted SMEs’ general perception that Corporation Tax is a complex tax, as well as SMEs concerns about getting things wrong. As such, smaller businesses (for example, single owner operators) who may be expected to have relatively more simple Corporation Tax matters, might still perceive their matters to be complex. These interrelated factors are also reflected in the previous finding that smaller, newer and less confident businesses were more likely to perceive Corporation Tax to be difficult.

Question 6

6.  Perceptions of the ease or difficulty of managing specific Corporation Tax processes

Accepted Answer

This section explores SMEs’ perceptions of the ease or difficulty in completing Corporation Tax administrative tasks and processes such as record keeping, preparing accounts and completing the CT600 return. It identifies the tasks SMEs find most difficult and their perceptions of what makes Corporation Tax administration challenging.

6.1 Perceptions of ease and difficulty of administrative processes

In the qualitative discussions, SMEs collectively described a typical journey when managing Corporation Tax obligations, from understanding requirements, to record keeping, calculating and preparing figures, checking accounts prior to submission, making payments and settlements, and finally resolving issues.

SMEs interviewed were generally happy with the process of managing Corporation Tax. Record keeping was perceived as straightforward. In particular, the development of software to support record keeping and preparing accounts were perceived to make this part of process easier. For those SMEs who use agents, elements of the process that they perceive as more difficult are made easier (for example, calculating and preparing figures and completing the CT600 form). SMEs also felt the payment system was simple and straightforward.

In the survey, among SMEs that performed Corporation Tax tasks in house, large majorities said they found making payments (85%) and keeping records needed to prepare accounts (81%) easy to complete (Figure 4). Similar proportions reported that responding to agent queries about accounts or Corporation Tax computations (70%) and preparing accounts (65%) were easy.

Factors	SMEs trading for less than 5 years
Limited liability protection	24%
To give the business a formal structure	11%
Pay a lower rate of tax	10%
Advised by an agent	9%
To increase credibility or the business’ professional image	9%
To separate personal and business assets	8%
To help the business grow	7%
To meet supplier criteria of certain contracts	6%
Don’t know	14%

Source: D2 For each task, tell me the extent to which you feel it is easy or difficult for your business to deal with. Think of the tasks done by your business, including dealing with an agent, but not anything done by an agent. Please give an answer on a scale of 1 to 5 where 5 is very easy and 1 is very difficult.

According to SMEs surveyed, the most difficult Corporation Tax related tasks were completing and filing the CT600^{[footnote 2]} (19% felt it was difficult) and making amendments to the CT600 return (29% felt the task was difficult).

In the qualitative discussions, the CT600 form was seen as too complex and daunting by some, including by SMEs that used an agent to help them prepare it. SMEs acknowledged they needed to engage with the process of completing the return, but some thought that it was not designed to be user-friendly. However, larger businesses who managed Corporation Tax themselves often had staff trained in finance, so difficulties with the CT600 was not raised as a particular issue.

Overall, 14% of all SMEs found 2 or more of the processes measured in the survey difficult. This was higher among:

single owner operators (19% compared with 11% of those with at least 1 employee)
with turnover less than £10,000 (22% compared with 13% of those with turnover more than £10,000)
had traded for 5 years or less (19% compared with 11% of those that had traded for more than 5 years)
outsourced at least some Corporation Tax work (16% compared with 9% of those that did tasks in house)
not confident dealing with Corporation Tax (32% compared with 5% of those that were confident)

6.2 Factors influencing difficulty of administrative processes

In the survey, among SMEs that said they found Corporation Tax overall to be difficult to deal with or found any particular task or process difficult to complete, the most common reason given was understanding the complexity of requirements (39%; Figure 5).

Figure 5: Reasons Corporation Tax is difficult to deal with (mentioned unprompted by 5% or more SMEs)

Reasons	SMEs that found anything to do with Corporation Tax difficult
Understanding complex requirements	39%
Administrative burden of record keeping and preparing statements	17%
Complexity of Corporation Tax computations	15%
Keeping up to date with Corporation Tax administrative requirements	11%
Resolving Corporation Tax issues with HMRC	10%
Understanding eligibility for reliefs or allowances	8%
Complexity of CT600 return	7%
Accessing guidance that is relevant to the business	6%

Source: D3 In your view, what makes dealing with Corporation Tax most difficult? Unweighted base = 294

In the qualitative interviews, there was a perception that as SMEs gain experience, related Corporation Tax administration and tasks feel easier, assuming the nature of the business stays the same. This aligns with survey findings that newer and less confident SMEs reported greater perceptions of difficulty. Qualitative interviews also suggested that pain points vary depending on where the business is in terms of their growth and development. For example, some SMEs that managed their own Corporation Tax activities and did not claim reliefs or allowances, start with an agent, but take over management of Corporation Tax administration over time.

Although difficulties existed to some degree at all stages of Corporation Tax administration, these were most notable when needing to understand requirements or resolve issues. SMEs felt that the time they had taken to understand the requirements or resolve any issues, was valuable time lost, that could have been spent running the business.

In addition, pain points are affected by the changing nature of Corporation Tax requirements, causing reluctance among SMEs to take over managing their obligations. In qualitative interviews, both SMEs and agents felt that some requirements, for example claiming Research and Development tax reliefs and capital allowances, changed often making it challenging to keep up.

The perceived frequency with which requirements changed was a key driver in SMEs use of an agent. In qualitative discussions, some SMEs felt that guidance and information to support them to understand the requirements and undertake administrative processes and tasks were both hard to find and hard to understand. Some felt it was deliberately challenging to ‘catch people out’. SMEs that managed Corporation Tax in house admitted to not always fully understanding the requirements, but followed a set template in the hope they were compliant. Agents were seen as ‘worthwhile’ because of their specialist knowledge, but HMRC support and contact points were typically seen as limited, particularly when trying to resolve issues.

Question 7

7.  Claiming Corporation Tax reliefs and allowances

Accepted Answer

This section outlines the proportion of SMEs claiming Corporation Tax reliefs and allowances in the last 3 years. It also presents SMEs perceptions of the ease of finding and understanding HMRC guidance specific to reliefs and allowances.

7.1 Reliefs and allowances claimed

Just under half (44%) of SMEs said they had claimed any type of relief or allowance in the last 3 years. The most common reliefs claimed were capital allowances (26%) and trading losses (21%). Smaller proportions of SMEs had claimed other types of reliefs or allowances (Figure 6).

Figure 6: Corporation Tax reliefs and allowances claimed in the last 3 years

Reliefs	SMEs
Capital allowances	26%
Trading losses	21%
Research & Development tax relief	6%
Capital or property business losses	4%
Other	2%
None of these	51%
Don’t know	5%

Source: E1 Which, if any of the following Corporation Tax reliefs and allowances has your business claimed in the last 3 years? Unweighted base = 1,000

SMEs that were more likely to have claimed at least one type of Corporation Tax relief or allowance were:

those with at least 1 employee (51% compared with 35% of single owner operators)
had turnover more than £85,000 (56% compared with 36% of those with turnover less than £85,000)
had traded for more than 5 years (56% compared with 30% of those that had traded for 5 years or less)

Findings from the qualitative phase indicated that SMEs claiming reliefs that are perceived as complex (Research and Development tax reliefs and capital allowances) experienced more pain points. Specifically, SMEs that used an agent viewed reliefs and adjustments as being too complex to deal with without specialist knowledge. They also felt that it can be time consuming to respond to their agent’s queries when they are preparing figures, which can impact on the day to day running of their business.

7.2 HMRC guidance on reliefs and allowances

SMEs were asked to what extent they felt it easy or difficult to find, and to understand HMRC guidance on reliefs and allowances. Responses were mixed with similar proportions reporting that guidance is easy to find and understand as those reporting it is difficult. Specifically, around a quarter of SMEs said guidance was easy to find (26%) and easy to understand (22%). In contrast, around one-third felt that guidance was difficult to find (30%) and difficult to understand (34%, Figure 7).

Figure 7: Rating the ease of finding and understanding guidance on reliefs or allowances

Rating of HMRC guidance on Corporation Tax reliefs and allowances	Difficult: 1 or 2 out of 5	Neutral: 3 out of 5	Easy: 4 or 5 out of 5	Don’t know or Not used guidance
Ease of finding	30%	26%	26%	18%
Ease of understanding	34%	26%	22%	18%

Source: E2 E3 To what extent do you think HMRC guidance on Corporation Tax reliefs and allowances is easy or difficult to find and understand? Please give an answer on a scale of 1 to 5 where 5 is very easy and 1 is very difficult. Unweighted base = 1,000

These mixed responses were not explained by whether SMEs had experience of claiming reliefs or allowances in the last 3 years. SMEs that had claimed any relief or allowances in the last 3 years were no more or less likely to say that finding or understanding guidance was difficult or easy, compared with SMEs that had not claimed any relief or allowance. However, regardless of whether they had recently claimed any relief, some sub-group differences emerged in perceptions of related guidance.

SMEs more likely to say guidance on reliefs and allowances was difficult to find were:

single owner operators (38% compared with 25% of those with at least 1 employee)
those who had traded for 5 years or less (36% compared with 26% of those that had traded for more than 5 years)
not confident dealing with Corporation Tax (46% compared with 20% of those who were confident)
felt their Corporation Tax matters are ‘very complex’ (65%) or ‘somewhat complex’ (35%) compared with those who said they are ‘not at all complex’ (22%)

SMEs more likely to say guidance on reliefs and allowances was difficult to understand were:

not confident dealing with Corporation Tax (55% compared with 22% of those who were confident)
felt their Corporation Tax matters are ‘very complex’ (62%) or ‘somewhat complex’ (46%) compared with those who said they are ‘not at all complex’ (24%)
outsourced all (44%) or some (34%) Corporation Tax related work, compared with those who do all work in house (22%)

Among SMEs that felt guidance was difficult to understand, 15% thought capital allowances were particularly difficult, and 11% thought Research & Development tax relief was difficult, although 36% did not know which relief or allowance was particularly difficult to understand.

Question 8

8.  Impact of the administrative requirements of Corporation Tax

Accepted Answer

This section explores SMEs perceptions of the impact of Corporation Tax administration in relation to the time and cost of dealing with this administration, business growth, and stress and anxiety.

Qualitative findings suggested that the pain points of Corporation Tax administration and their impacts are dynamic and change over time. There was a perception that as SMEs gain experience, pain points feel easier, assuming the nature of the business stays the same.

Pain points vary depending on where the business is in terms of their growth and development. For example, some SMEs that managed their own Corporation Tax activities and did not claim reliefs or allowances, start with an agent, but take over management of this administration over time. However, pain points are also affected by the changing nature of Corporation Tax requirements, causing reluctance among SMEs to take over managing their obligations.

In the survey, SMEs were asked the extent to which the administrative requirements impact their business. Of the four statements, two were positively framed and two negatively framed. SMEs were divided on whether the amount of time they spent dealing with the administrative requirements of Corporation Tax was reasonable, with 30% of SMEs agreeing, and 38% disagreeing. Two-fifths (44%) of SMEs agreed that the financial cost of dealing with Corporation Tax requirements, over and above the amount of tax they must pay is reasonable, while one-quarter (26%) disagreed (Figure 8).

Figure 8: Impact of the administrative requirements of Corporation Tax

Impact	Disagree: 1 or 2 out of 5	Neutral: 3 out of 5	Agree: 4 or 5 out of 5	Don’t know
The financial cost of dealing with Corporation Tax, above the amount of tax we must pay, is reasonable	26%	26%	44%	3%
My business spends a reasonable amount of time dealing with Corporation Tax	38%	28%	30%	4%
Dealing with Corporation Tax has led to stress and anxiety within my business (negatively framed statement)	49%	23%	26%	2%
The administrative burden of Corporation Tax has had a negative impact on business growth (negatively framed statement)	66%	13%	18%	3%

Source: F1 Thinking about the administrative tasks involved in dealing with Corporation Tax, rather than the tax rates and amount of Corporation Tax your business pays, please tell me the extent to which you agree or disagree with each. Please answer on a scale of 1 to 5, where 5 is agree strongly and 1 is disagree strongly. Unweighted base = 1,000

The qualitative discussions, however, did reveal that the impact of pain points can be financial in nature. For some SMEs, pain points such as understanding requirements or complexity of calculations, tended to increase the need to use an agent, thus contributing to business expenditure. Furthermore, some SMEs found themselves spending a significant amount of time on Corporation Tax, which had an opportunity cost in terms of the time spent away from running the business.

“Our time is literally money, and we’re wasting so much of it going back and forth on this stuff. Inputting data, talking to our accountant, arranging something to be paid, having to sit on the phone, having a discussion about a letter that didn’t arrive.“ (SME, use an agent, small)

Most SMEs (66%) felt that dealing with the administrative requirements of Corporation Tax did not have a negative impact on business growth, though 18% felt it did. However, in the qualitative interviews some SMEs felt that difficulties had led to a delay in some business decisions, which could have affected their ability to take certain risks, limiting long term growth. Furthermore, budgeting for Corporation Tax impacted cash flow, and in some cases limited the business’ ability to invest. Some SMEs felt it was hard to budget for Corporation Tax as the calculation was perceived to be too complex to predict monthly.

“There is a lack of clarity with information [around requirements]. This means we are not as tax efficient as we should be. This affects the growth of the business, as you might be paying more tax than you should be.” (SME, mixed managed, medium)

In the qualitative interviews, the impact of pain points was also seen by some as emotional, leading to stress and anxiety, and contributing to negative perceptions about HMRC being punitive and not on the side of businesses.

Among SMEs surveyed, one-quarter (26%) agreed that dealing with Corporation Tax requirements had led to stress and anxiety within their business, however half (49%) disagreed. Agreement that dealing with Corporation Tax had led to stress and anxiety was associated with length of trading (5 years or less), greater complexity of the businesses’ Corporation Tax matters, lower confidence, and higher difficulty in dealing with related administration.

Question 9

9.  Channel use in interactions with HMRC

Accepted Answer

This section explores SMEs use of and preferences for different HMRC contact channels to seek information or resolve queries relating to Corporation Tax. It also explores SMEs’ ratings of HMRC’s digital services such as the Business Tax Account and HMRC guidance on GOV.UK.

9.1 Types of contact channels

SMEs were asked which methods they had used to seek information or resolve a query about Corporation Tax in the last 12 months, and which methods they would prefer to use. Channels were grouped into ‘self-serve’ and ‘assisted serve’ where:

self-serve methods included accessing guidance on GOV.UK, using customer forums on GOV.UK, HMRC webchat, and HMRC digital learning products (webinars or YouTube channel)
assisted serve methods included telephone, email, letter or face to face

Most SMEs (97%) said they had used either self-serve channels only (59%), or both self-serve and assisted serve channels (38%) in the previous 12 months. Only 3% had used assisted serve channels only. However, SMEs were more divided on their preferences for channel use, two-fifths (38%) said they would prefer to use assisted serve channels only, 41% self-serve channels only, and 22% expressed preferences for both channel types.

Overall, both used and preferred channel types to seek information or resolve a query about Corporation Tax did not significantly differ by business size or turnover, length of trading, complexity of Corporation Tax matters or difficulty in dealing with related administration.

9.2 Individual contact channels

Among individual contact channels, the most commonly used and preferred channel to seek information or resolve queries was via accessing guidance on GOV.UK (63% used, 39% preferred). Around a quarter of SMEs had used the Business Tax Account (25%) or telephone (22%). However, only 7% expressed a preference for using the Business Tax Account, and 37% expressed a preference for using telephone channels (Figure 9).

Smaller proportions of SMEs reported using other channels such as email (13%) and HMRC webchat (12%). However, preference for using these channels was higher as one in five SMEs would prefer to use email (22%) or webchat (21%). SMEs responses indicate four main channel preferences: guidance on GOV.UK, telephone, email, and webchat. This reflects SMEs desire for a range of contact options that offer both the ability to self-serve and to receive assistance from HMRC. SMEs views on contact channels and customer support options are explored further in chapter 10.

Figure 9: Contact channels used and preferred to seek information or resolve a query (reported by 5% or more SMEs)

Channels	SMEs used in last 12 months	SMEs preferred channel
Accessing guidance on GOV.UK	63%	39%
Business Tax Account	25%	7%
Telephone	22%	37%
Email	13%	22%
HMRC digital learning products (YouTube or webinars)	13%	9%
HMRC webchat	12%	21%
Customer forums on GOV.UK	9%	6%
Letter	7%	3%
Via an agent	7%	11%

Source: H1 Which if any of the following methods have you used to seek information or resolve a query about Corporation Tax from HMRC in the last 12 months? H2 And which method would you prefer to use to seek information or resolve a query about Corporation Tax? Unweighted base = 1,000

There were no significant subgroup differences in individual channels used by business size or turnover, though some differences emerged by confidence, agent use and length of trading, including:

SMEs who were confident in dealing with Corporation Tax were more likely to have used guidance on GOV.UK (68% compared with 54% of those who were not confident)
those who did all Corporation Tax administration within the business were more likely to have used guidance on GOV.UK (87%), Business Tax Account (39%), webchat (19%) and digital learning products (20%) compared with those who outsourced all work relating to Corporation Tax (GOV.UK guidance 46%, Business Tax Account 21%, webchat 6%, digital learning products 8%)
those that had traded for 5 years or less were more likely to have used email to contact HMRC (18% compared with 9% of those that had traded for more than 5 years)

9.3 Ratings of digital services

Among SMEs that had used HMRC digital services, the majority rated these positively. In particular, 70% of those who had used the Business Tax Account rated it ‘good’ (gave a rating of 4 or 5 out of 5 where 1 was very poor and 5 was very good). HMRC webchat was the most negatively rated, with 36% rating this as poor (gave a rating of 1 or 2 out of 5, Figure 10).

Around half (56%) of SMEs rated guidance on GOV.UK as good. However, SMEs that felt confident about dealing with Corporation Tax were more likely to say guidance on GOV.UK was good (68%) compared with those that were not confident (36%). As noted in section 6, during qualitative interviews, some SMEs expressed the view that guidance on GOV.UK was difficult to find or understand, and in the survey, a sizable minority (13%) rated this as poor. There were no other significant differences in ratings of digital services by subgroups such as business size or length of trading.

Figure 10: Ratings of HMRC digital services

Digital service (unweighted base = x)	Poor: 1 or 2 out of 5	Neutral: 3 out of 5	Good: 4 or 5 out of 5
Business Tax Account (243)	6%	24%	70%
HMRC digital learning products (127)	14%	28%	58%
Guidance on GOV.UK (603)	13%	31%	56%
HMRC webchat (109)	36%	16%	47%
Customer forums on GOV.UK (68)	6%	50%	44%

Source: H3 I am going to read a list of HMRC’s digital services for dealing with Corporation Tax related processes. On a scale of 1 to 5, where 5 is very good and 1 is very poor, please rate your experiences of using HMRC’s online services to deal with Corporation Tax matters in the last 12 months. If there are any that you have not used, you can say not applicable. Base: Variable, Businesses that have used digital services, rebased excluding Don’t Know and Not Applicable

Question 10

10.  Corporation Tax payments and repayments

Accepted Answer

This section explores SMEs awareness of early payment options and credit interest, and for those who have been due a repayment, their experiences of receiving repayments from HMRC.

10.1 Payments

For most companies, the current Corporation Tax payment deadline is 9 months and 1 day after the end of the accounting period. However, HMRC will pay interest if the business pays its Corporation Tax earlier than the due date, known as ‘credit interest’.

Findings from the qualitative phase indicated that few SMEs were aware of credit interest or their options for early payment. These discussions suggested that the decision to make early payments depended to a greater extent on business’ cash flow and the ease of receiving repayments from HMRC, rather than credit interest.

SMEs felt that they would prioritise liquidity in their business over making early payments. Those with complex Corporation Tax matters felt it would not be practical to make early payments as they would not be able to accurately calculate the amount owed.

In the survey, 45% of SMEs said they currently chose to pay their Corporation Tax before the due date. Those more likely to choose to pay early included single owner operators (50%) and those with less than 10 employees (43%) compared with 29% of those with 10 to 49 employees and 26% of those with 50 to 250 employees.

A quarter (26%) of SMEs were aware of credit interest. Single owner operators were least likely to be aware (20%), while businesses with 50 to 250 employees were most likely (38%). Those who felt confident in dealing with Corporation Tax were more likely to be aware of credit interest (34%) compared with 10% of those who were not confident.

Overall, just over half (54%) of all SMEs said they would be likely to pay early in the future due to credit interest. Among those who were not previously aware of credit interest, 58% said they would choose to pay early in the future.

During qualitative discussions, SMEs responded positively to the idea of spreading payments. However, they wanted this by extending the payment period rather than making early payments. SMEs would also like to be able to see a record of their payments and access any repayment easily and quickly. Some SMEs would like the option to use overpayments to cover other tax payments.

10.2 Repayments

Findings from the qualitative phase indicated that the majority of SMEs interviewed had never received a repayment from HMRC, however, there was a perception among some that this would be difficult. Similarly, among those surveyed, only a minority (11%) of businesses said they had been due to receive a Corporation Tax repayment (refund) in the last 3 years. Those more likely to have been due a repayment were SMEs with:

ten to 49 employees (19%) or 50 to 250 employees (25%), compared with single owner operators (9%) or 1 to 9 employees (12%)
turnover of £5 million or more (25% compared with 11% of those with less than £5 million turnover)

Among those who had been due a repayment, the majority (67%) received this directly in their bank account (BACS transfer). Small proportions received their repayment via other methods, and 15% were yet to receive the repayment.

Among those who had received their repayment (excluding those yet to receive it), 79% had received this directly (bank transfer), and one-tenth (11%) by payable order (namely, by cheque). When all who were due a repayment were asked their preferred method to receive it, 88% said they would prefer direct bank transfer. However, none expressed payable order as their preferred method for repayment.

Among those who were due a repayment, three-fifths (59%) were satisfied with the process. One-quarter (24%) were dissatisfied. Among those who were dissatisfied, three-quarters (77%) said this was due to the time taken to receive the repayment.

Question 11

11.  Improving the process of managing Corporation Tax

Accepted Answer

This section presents SMEs’ views on and responses to HMRC proposed solutions to improve the process of managing Corporation Tax. It also summarises SMEs’ unprompted suggestions and preferences for ways in which HMRC can make improvements to the process, and SMEs’ perceptions of trust in HMRC.

11.1 Solutions to improve the administration of Corporation Tax

The qualitative phase explored a range of solutions to support businesses to manage Corporation Tax administration. Discussions presented HMRC generated ideas for improvements and captured SMEs’ views, feedback and suggestions for how these solutions may be improved. The solutions presented were not committed to by HMRC but served as stimulus for discussion and feedback. In some cases, this included discussion of solutions that already existed, such as the Corporation Tax dedicated helpline for businesses. The key themes emerging from the discussions of solutions were:

customer contact and support
information access and clarity
enhanced digitalisation
simplification of reliefs and allowances

In the survey, an open, unprompted question was included, asking SMEs to suggest in a few words, the single biggest improvement HMRC could make to the process of managing Corporation Tax. These responses were thematically coded following fieldwork (Figure 11).

Themes emerging from the open survey responses were broadly similar to those emerging during the qualitative discussions. In the survey, SMEs suggested improvements centred around clarity of information and guidance, less bureaucracy (making the process easier to complete), increased digitalisation, navigation of online services, and improved telephone support and communication from and with HMRC.

Figure 11: SMEs views on improvements to the process of managing Corporation Tax (unprompted mention by at least 5% of SMEs)

Suggested improvements (thematic)	SMEs
Simplified, clearer guidance	10%
Less bureaucracy (making the process easier to complete)	10%
Increase digitalisation	8%
Reduce tax rates	7%
Navigation of online services	7%
Improve telephone helplines	6%
Better communication	6%
Everything in one place	5%
Nothing	10%

Source: K5 In a few words, what is the single biggest improvement HMRC could make to the process of managing Corporation Tax? Unweighted base = 1,000

11.2 Customer support and contact points

Findings from both phases highlighted business’ desire for high quality options for customer support, particularly telephone helplines and digital support (email or webchat). There was a perception among both agents and SMEs that HMRC was hard to reach, so resolving queries or issues was perceived as a particular pain point in the process. Agents and SMEs interviewed and surveyed reported:

long wait times on helplines and delays in responding to written correspondence
helpline staff lacking knowledge on tax issues and on basic accounting, and as such support provided to them fell short of their needs and expectations
some issues were resolved by letters which was seen as out of date, slow, and presenting an increased security risk and risk of correspondence being missed or not received

Qualitative findings indicated limited awareness of the Corporation Tax dedicated helpline. SMEs wanted access to advisors who had specialist tax knowledge and could advise immediately and avoid signposting. SMEs also recommended a call back function, mentioning positive experiences from other organisations.

“Making sure they have someone with the skillset and knowledge at the other end of the phone, because quite often, you’re juggling things during your day, and you’ve got a query and you want someone to give you an answer there and then.” (SME, use an agent, small)

In qualitative discussions, solutions presented relating to customer contact points and support included:

multiple channels to reach HMRC
promotion of existing channels such as the Corporation Tax dedicated helpline
Corporation Tax dedicated webchat via 24-hour chatbot
contact guide outlining which channel to use for different types of queries
case history, a feature already available on the Corporation Tax dedicated helpline

SMEs responded positively to the idea of guidance on what different contact points can deal with a specific type of issue. They saw value in having a range of contact points available to them. However, they felt that raising awareness about the types of support available and when to use different contact points would be required.

SMEs welcomed the idea of a webchat, as this was seen as potentially time saving compared with telephone channels. However, they emphasised that this needed to be a person, rather than a chatbot, which was the idea presented. They did question the viability of this though given HMRC staff shortages.

“The word chatbot puts the fear of God into me. This (the solution) is not about quantity, it’s about quality. Chatbots are fantastic in certain contexts. When you’re educating the customer about something really simple, but they are really off-putting in the wrong context.” (SME, mixed managed, small)

SMEs responded positively to a case history being available when they contacted HMRC. SMEs expected that this history should hold all relevant and up to date information about their circumstances and prior communications.

Among survey respondents, comments centred around needing to repeat information to telephone advisors, suggesting that many SMEs were unaware that a case history function was available via the Corporation Tax dedicated helpline.

“If we can have designated people to look after our account, which means when we have a query or past correspondence, it could be easily identified. Every time you ring HMRC, you have numerous reps. We have to start from scratch and explain the whole story. If we could have more of an account manager, so [we] are to be able to call the person who looks after your general area, with the email too, to be able to email your direct contact.” (SME, some outsourced, medium)

11.3 Information access and clarity

SMEs in both phases of the research reported that the clarity of information and guidance is a pain point in their experiences of managing Corporation Tax administration, particularly among those who are less confident or feel they have more complex Corporation Tax matters. Among survey respondents, SMEs who found dealing with Corporation Tax difficult (19%) and those who were not confident in dealing with it (15%) were more likely to suggest simpler or clearer information and guidance compared with those who found it easy (8%) or that were confident (7%).

In qualitative discussions, solutions presented relating to information access and clarity included:

improvements to the structure and language of the HMRC website
user friendly guidance with clear examples and illustrations
presenting the CT600 form in a more interactive way

SMEs in both phases felt that increased clarity of information would enable a greater level of self-service, where they could resolve issues or queries with limited support from agents or HMRC advisors. SMEs in both phases expressed similar views about what is required to achieve this.

SMEs would like to see guidance presented in layman’s terms, and with a non-specialist audience in mind, although some SMEs acknowledged that this is difficult due to the complexity of Corporation Tax. Some suggested an introductory or ‘dummies’ guide for businesses, summarising the processes and key information, with links to more detailed or complex information such as reliefs and allowances. SMEs felt that this could be of particular benefit to new or smaller businesses, as well as those looking to find information on requirements before deciding to incorporate.

“There should be a basic layman’s guide to what Corporation Tax is, how it works and simple calculator. I couldn’t seem to find an introductory breakdown, and it took such a long time to understand how it all works, so [I] had to find an accountant. A simple walk through the basics would be helpful.” (SME, some outsourced, nano)

SMEs would also like to see HMRC provide worked up examples, with less dense text and increased use of illustrations and example calculations for different types of businesses. SMEs also stressed the need for guidance to be regularly updated, with changes highlighted upfront.

Suggested improvements to the website included making it more interactive, visual and supported by a search function to support navigation of the guidance pages. In both the qualitative and quantitative phases, SMEs noted that navigating the online guidance was difficult, and that they were unsure if they had found everything they needed to know. SMEs’ worries about making a mistake and receiving penalties adds to concerns about missing something in the guidance and increases their reliance on agents.

“On the government website, you seem to search for something and get loads of different pages, sometimes I struggle to link them together. There is a little bit of information everywhere, it could probably be organised better. When you research things, you’re not sure if you’ve caught everything, or need to search more? Because if I’ve not searched for the right thing, then maybe there’s more information on that, but that I haven’t picked up.” (SME, own managed, small)

SMEs in both phases said that they would like the CT600 form to be more interactive and tailored. For some SMEs there is a perception that it is overwhelming and contains elements that are not relevant for all types of businesses.

“Probably simplifying the forms. The CT600 form has an awful lot of boxes to fill in. If it was an online process that tailored what you needed to fill in, to your answers, that would simplify things. For example, if it’d ask you a question ‘do you have any income from property?’ If you said no, then it would remove any questions related to property, so tailoring the questions based on your answers.” (SME, some outsourced, medium)

11.4 Enhanced digitalisation

In qualitative discussions, solutions presented relating to enhanced digitalisation included:

more letters to be received digitally
where a company has a Business Tax Account, PIN numbers could be made available here rather than through the post

SMEs gave mixed reactions to ideas to enhance digitalisation including digital letters and receiving PIN numbers through the Business Tax Account when registering for another service. While some responded positively, others felt these solutions fell short of using more advanced technology. As most SMEs should now be signed up for Making Tax Digital for VAT, a few SMEs reported that they would like to also see further digitisation of Corporation Tax processes. These businesses felt that increased use of software would make it easier to self-serve and provide them with greater reassurance. Some SMEs stressed that HMRC must allow businesses to choose how they receive communications. Some SMEs also felt this solution could benefit HMRC, for example by adding functionality to allow HMRC to be notified when letters have been read.

In qualitative discussions, suggestions to improve these solutions included HMRC only sending warning letters by post and to send all other communication electronically, referencing their experience with other organisations. SMEs also acknowledged the need for additional encryption to increase security if digitalisation is enhanced. Some SMEs responding to the survey commented that existing communication methods, particularly via letters, lacked security and increased the risk of a security breach.

In the survey, these solutions were developed further, and more specific ideas for enhanced digitalisation were presented. Businesses were asked the extent to which these new digital services proposed by HMRC would be beneficial to their business once up and running. The majority of businesses rated all of these proposed services positively. The service rated as most beneficial was the ability for businesses to submit documents to HMRC electronically via a secure portal (81% rated as beneficial, Figure 12).

Figure 12: Extent to which increased digitalisation would be beneficial

Digital service	Not beneficial: 1 or 2 out of 5	Neutral: 3 out of 5	Beneficial: 4 or 5 out of 5	Don’t know
Submitting document to HMRC electronically via a secure portal	5%	10%	81%	4%
HMRC to send routine communications via a secure electronic portal	13%	15%	70%	3%
Digital and personalised, single digital account	15%	18%	63%	3%
Sharing documents in real time with HMRC	17%	17%	61%	4%

Source: I1 As part of modernising tax administration HMRC wants to introduce a digital and personalised, single digital account for businesses to deal with all their tax affairs online, in one place. Once up and running, how beneficial do you think this would be to your business? I2 I am going to read a list of new digital services being considered to send and receive information from HMRC. Please use a scale from 1 to 5 where 5 is very beneficial and 1 is not at all beneficial. Unweighted base = 1,000

A small number of subgroup differences emerged by length of trading, agent use, and likelihood of making early repayments in the extent to which it was felt new digital services would benefit SMEs:

SMEs that had traded for 5 years or less were more likely to say a single digital account would be beneficial (68% compared with 59% of those that had traded for more than 5 years)
SMEs that did all work in house were more likely to say that sharing documents in real time (69%) or via a secure portal (85%) would be beneficial, compared with those who outsourced Corporation Tax related work (54%, 74% respectively)
SMEs that said they were likely to pay early in the future were more likely to say that routine communications via a secure portal would be beneficial (76% compared with 65% of those that did not intend to pay early in future)

In the open question asking survey respondents to suggest improvements, some SMEs referred to these digital solutions presented earlier in the survey, elaborating on the potential benefit for their business in how they manage their Corporation Tax obligations and communication with HMRC.

“It’s the digital communication. The ability to send information between both parties digitally, rather than having to rely on the post. Either via a secure portal or sharing on screen whilst you are on a chat, via a secure portal would be ideal. It’s just the speed of dealing with HMRC is often very difficult.” (SME, some outsourced, medium)

11.5 Simplification of reliefs and allowances

In qualitative discussions, solutions presented relating to simplification of reliefs and allowances included:

streamlining adjustments to bring accounting profits and profits chargeable to Corporation Tax closer together
a simplified but narrower set of claimable reliefs and allowances

Streamlining adjustments to bring accounting profits and profits chargeable to Corporation Tax close together was not viewed as an acceptable solution by SMEs. They felt they would claim fewer allowances or reliefs and would pay more tax. A simplified, but narrower, set of claimable reliefs and allowances was also viewed negatively by some. It was assumed that HMRC would remove allowances currently in use, resulting in some SMEs paying more tax. However, some felt this would mean large companies having fewer loopholes for avoiding tax which may be positive.

“A simpler set of claimable reliefs and allowances does sound nice, but simpler and narrower, all I hear is I’m going to get a bigger Corporation tax bill, you’re going to take some of it out as a way to make it simpler, as that might be the only way to do it across multiple industries.” (SME, mixed managed, nano)

“What we’re asking for is for adjustments to be clearer in the way they are stated, not streamlined. End result should be to make it easier to claim what we can.” (SME, mixed managed, medium)

SMEs felt that HMRC could improve on this solution by making changes to allowances very clear year on year and focusing on making them easier to understand through support and guidance (for example, videos, visuals) rather than by changing the actual adjustments themselves.

11.6 Trust in HMRC

During the qualitative phase, a few SMEs expressed some lack of trust in HMRC, driven by a perception that HMRC’s approach can be punitive and not on the side of businesses. This undermined their perception about the efficacy of the possible solutions to help improve the process of managing Corporation Tax.

Survey responses indicated that over half (56%) of SMEs agreed with the statement ‘HMRC is an organisation that I trust’, while just under one-fifth (17%) disagreed. There were no significant subgroup differences by business size, age, or turnover. SMEs that were more likely to agree that they trust HMRC were those who:

did all Corporation Tax work in house (65% compared with 50% of those who outsourced all work)
felt their Corporation Tax matters are ‘not at all complex’ (59%) or ‘somewhat complex’ (59%) compared with those who said they are ‘very complex’ (38%)
were confident in dealing with Corporation Tax (64% compared with 48% of those who were not confident)

Question 12

12.  Conclusion

Accepted Answer

SMEs’ understanding of Corporation Tax requirements before incorporation is relatively low

Both the qualitative and quantitative phases provided insight on SMEs’ perceptions and experiences of managing their Corporation Tax administration. Overall, agents and SMEs generally had a positive view about the incorporation process. SMEs incorporated for a range of reasons including limited liability, credibility, growth and tax efficiencies. However, only a third (34%) said they had a good understanding of Corporation Tax requirements before incorporation, while one-quarter (24%) were not familiar with the requirements.

Most SMEs rely on agents to support them with Corporation Tax knowledge and administration tasks

While a quarter of SMEs (23%) dealt with Corporation Tax in house, 77% outsource some or all tasks including preparing accounts, performing calculations and completing the CT600 return. Slightly more than half of all SMEs relied on their agent to a great extent (57%). Across both phases use of agents was driven by a number of factors including perceived complexity of Corporation Tax, business age, size (number of employees) and turnover, confidence, fear of getting things wrong, and a perception of greater efficiencies and time savings. SMEs described the value of agents as a source of information about changes to tax requirements. Perceived disadvantages to using an agent included loss of control and cost, which included the need to share sensitive business data.

Smaller, newer and less confident SMEs were more likely to perceive Corporation Tax to be complex and find administrative tasks difficult

Overall, smaller, newer and less confident SMEs were more likely to find Corporation Tax administration difficult and perceive their matters to be complex. SMEs that had little or no understanding of the requirements before incorporation were also more likely to find Corporation Tax administration difficult.

Understanding the complex requirements was the most common reason SMEs found Corporation Tax difficult (39% of those that found some difficulty), and there was evidence that agent use was associated with greater perceived complexity. SMEs and agents were happy with the steps and overall process of managing Corporation Tax. Although pain points existed to some degree at all stages of the process, making amendments and completing and filing the CT600 were the processes most often considered difficult.

The primary impacts on SMEs of managing Corporation Tax were time and cost

SMEs were divided on whether the cost and time dealing with Corporation Tax was reasonable, but most did not feel it had a negative impact on business growth. Some SMEs felt an emotional burden due to the perceived importance of getting Corporation Tax right and fear of penalties. One-quarter (26%) agreed that managing requirements had led to stress and anxiety within their business, although half (49%) disagreed.

In qualitative discussions, for some SMEs, pain points such as understanding requirements or complexity of calculations, increased their need to use an agent, thus contributing to business expenditure. Some SMEs found themselves spending a significant amount of time on Corporation Tax, which had an opportunity cost in terms of the time spent away from running the business.

Increased clarity and simplicity of guidance and information would support SMEs to better understand Corporation Tax requirements

The improvements to Corporation Tax SMEs would value most were around providing clearer and more accessible guidance and reducing bureaucracy (10% of SMEs mentioned each of these spontaneously). SMEs expressed a desire for information from HMRC to be clear, simple and non-technical to help reduce perceptions of complexity, and that HMRC should differentiate between policy and legal language, using layman’s terms where possible and providing examples and illustrations.

Enhanced digitalisation of processes and customer support options were seen as key to supporting SMEs to manage Corporation Tax administration

HMRC digital services to deal with Corporation Tax were well regarded, for example 70% rated the Business Tax Account positively. However, as most SMEs should now be signed-up for Making Tax Digital for VAT, in qualitative discussions a few SMEs reported that they would like to also see further digitisation of Corporation Tax processes. In the survey, the digitalisation of processes was also welcomed by SMEs, for example, submitting documents via a secure portal (81% thought it would be beneficial) and receiving routine communications via a secure portal (70% thought it would be beneficial).

Some SMEs felt that HMRC was difficult to reach and that telephone helplines fell short of their needs and expectations, particularly when trying to resolve issues and queries. However, in both phases there was limited awareness of the Corporation Tax dedicated helpline. SMEs were inclined to want to self-serve when they needed guidance or to resolve an issue. Most SMEs self-served (59%) or used a combination of self-serve (for example, accessing guidance on GOV.UK, HMRC webchat) and assisted serve (for example, telephone, email) channels (38%) to resolve queries. However, SMEs were more divided on their preferences for channel use. 41% expressed a preference for self-serve channels only, 38% for assisted serve channels only and 22% would prefer both.

In qualitative discussions examining potential solutions to improving the process of managing Corporation Tax, SMEs saw value in having a range of contact points available to them. They responded positively to the idea of guidance on what different contact points can deal with a specific type of issue. However, they felt that raising awareness about the types of support available and when to use different contact points would be required.