New businesses need a single tax code to avoid registration confusion

Many small business owners and entrepreneurs may well have had a poor experience when dealing with HMRC. Inconsistency across departments, unfair penalties and a general air of miscommunication seem to be classic complaints from start-up companies and established businesses alike.

Now the Chairman of the Public Affairs Committee, Edward Leigh MP, has slammed HMRC for "badgering" small business people and making the tax registration process complicated and dis-jointed. The MP has called for the organisation to do more to help businesses meet their tax obligations.

Around 700,000 new businesses start up each year in the UK. They have to register for a number of different taxes (Corporation Tax, VAT, PAYE, NIC) rather than providing one single registration. Unsurprisingly, the complexity of the registration process means many new businesses end up with penalties for late provision of information. New businesses incur late filing penalties of over £8 million on Income Tax Self Assessment and Corporation Tax.

The Public Affairs Committee emphasised the inefficiencies caused by multiple registrations. In Canada and Australia, for example, the tax authorities offer single registration for all taxes, allowing businesses to provide basic information only once and additional details as and when needed for specific taxes.

In contrast - back in the UK during 2004-05, HMRC imposed penalties totalling £6.7 million in nearly 70,000 cases of late registration for Class 2 National Insurance Contributions and VAT.

Edward Leigh MP said, "Providing each business with a unique tax reference number would be an important step towards the Department being able to have an overview, for each business, of all of its tax affairs."