How else can HMRC cut red tape for businesses?

Accountants and bookkeepers discuss the administrative burdens they would like to see HMRC scrap.

The Government has scrapped plans that would have required businesses to report employee working hours to HMRC from April 2025/26.

These plans were unpopular among businesses as they’d have created additional administrative, regulatory and financial pressures.

Fortunately the Government has decided against them, in an attempt to ‘reduce red tape’.

Under the now-scrapped plans, businesses would have needed to complete PAYE returns via real-time reporting, providing detailed information about employees’ paid working hours as part of the Finance Act 2024. The legislation was intended to improve the accuracy of information and help HMRC with decisions around tax, policy and compliance.

Although businesses are already required to report on employees working hours via RTI, this primarily relates to a range – or category – of hours, whereas the changes would have required businesses to report on the actual hours worked.

Ditching these plans is a step in the right direction, but how else can HMRC reduce red tape and cut the administrative burden for businesses?

We put the question to accountants and bookkeepers.

Save time by digitising paper applications for agent codes

Björgvin Vigfússon, CGMA MAAT, Director, Heights Accountancy

With all the talk about Making Tax Digital, as a new practice owner, I can’t understand why in order to apply for an agent code for corporation tax, self-assessment tax and VAT I need to send in a paper copy application to HMRC.

The whole process can take about two months:

• 40 working days for HMRC to review and respond to the application
• 10 working days for the letter authorising these services to arrive
• 10 more working days for another letter authorising agents to act on behalf of their first client.

An online portal with status updates on ongoing queries would be very helpful. It would save agents spending up to an hour waiting on the phone only to be told there’s no update on their case.

Verdict: Digital applications for agent codes would make the process of setting up your own practice easier and quicker – and would be in the spirit of Making Tax Digital.

Better record-keeping would save time and effort

Karen Chugg, FMAAT AATQB, Owner, Phoenix Bookkeeping

HMRC needs to keep better records and fix issues when they’re first raised. The self-assessment and self-employment records are not linked and HMRC often remove Class 2 NIC as the person is not registered for self-employment. The accountant then has to contact HMRC, sometimes spending hours on the phone, or even months waiting for a letter.

As it stands, we have to take action annually because HMRC will add Class 2 for only one year and remove it again the following year. For one client alone, I have sent in three CWF1 forms and HMRC still removes Class 2 every year. 

It would also help if HMRC were to put the client name on VAT penalty letters. At the moment, only the registration number is shown and we have to look up the client each time. One simple action from them, to insert a placeholder with the client name, would help us so much.

Verdict: Better record keeping by HMRC would mean we don’t have to keep sending in CWF1 forms every year.

Simplified systems and real-time reconciliation would save hours

Nick Robinson, Managing Director, Yorkshire Accountancy Ltd

The Construction Industry Scheme (CIS) is a nightmare. Contractors must verify subcontractors, deduct tax at source, and submit monthly returns, while subcontractors often overpay tax and wait months for refunds. A simpler PAYE-style system would remove a huge burden from construction businesses and I think that has to be a massive time saver.

HMRC’s systems often don’t match what businesses have actually filed, leading to incorrect PAYE underpayment letters and VAT adjustments requiring manual input, defeating the purpose of Making Tax Digital. A proper real-time reconciliation system would prevent hours of wasted time chasing non-existent errors.

At present, businesses need multiple logins for VAT, PAYE, corporation tax, and self-assessment. Why? A single login for all tax services would make life much easier. Finally, businesses regularly receive statements demanding payments of a few pence, and sometimes even refunds of under £1. A simple £5 de minimis rule would cut pointless admin for everyone and save HMRC systems a lot of time and effort.

Verdict: Simplified systems and full digitalisation would mean errors could be corrected in real-time.

The extra red tape for first-time R&D claims is a barrier for businesses

Stef Fielding, Tax Director, Sapphire Accounting 

It used to be possible to make a simple R&D claim within a corporation tax return. Now, a first-time claimant must submit a notification of their intention to claim and an additional information form setting out the particulars of their claim, in addition to the tax return. Adding these requirements drives up the cost of completing an R&D claim which can be problematic in itself.

Additionally, HMRC’s strict application of some fairly arbitrary time limits for submitting these documents means that many businesses are excluded from being able to claim for qualifying R&D activity, simply because the administrative process may not have been completed correctly.

Verdict: Extra red tape around new R&D claims could be scrapped.

Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.