Welcome to the May 2011 Newsletter from Connolly Accountants Ltd

The Treasury has this month launched a review of how bureaucracy in the tax system is apparently hampering small firms. Exchequer Secretary David Gauke has called on the Office of Tax Simplification (OTS) to examine ways to improve tax administration for small businesses. The review will also consider the issues involved in starting and growing a new enterprise.

Meanwhile, new parents could share paternity and maternity leave more equally after the Government unveiled plans to introduce a more flexible system from 2015. Ministers will also consult on proposals to extend the right to request flexible working to all employees. However, some business groups have warned that the proposed changes will 'add to the red tape burden'.


Tax system 'hampering small businesses'

The Office of Tax Simplification (OTS) is to carry out a review of how bureaucracy in the tax system is hindering small businesses.

Earlier this month, the Exchequer Secretary to the Treasury, David Gauke, asked the OTS to examine small firms' experience of tax administration and 'their contact with HMRC at key stages of their annual cycle.'

'The first OTS reports have provided the basis for some genuine moves towards a simpler tax system,' wrote Gauke. 'To build on this excellent start, the Chancellor and I would like the OTS to look at ways to improve the tax administration for small business.'

The review will also consider the issues involved in starting and growing a new business.

According to recent media reports, one of the first areas to be examined could be how small businesses pay tax on the earnings of people working for more than one employer.

Commenting, John Whiting, interim tax director at the OTS, said: 'A clear message from the first stage of our small business project was that a big area of difficulty for small businesses was the administration that surrounds the tax system. I'm delighted that the Chancellor has endorsed our report and asked us to take it forward to the next stage.

'It's clear that many small businesses are struggling under the administrative burdens imposed by the UK tax system. We plan to set up surveys and more road shows to really home in on what steps cause the most difficulties – and how the system can be improved, making it easier for businesses to get things right with the minimum of fuss.'

The OTS was set up last year to analyse tax reliefs, allowances and exemptions, and to conduct a review of business taxation with a view to reducing complexity.

Publishing its first report ahead of this year's Budget, the OTS identified 47 reliefs which it said should be abolished and 17 which need to be simplified, including Entrepreneurs' Relief and the Enterprise Investment Scheme.

However, the most significant recommendation for the long-term was the proposed 'merger' of national insurance and income tax in future years.

The OTS is drafting terms of reference for its latest review and will shortly start gathering initial evidence before reporting ahead of the 2012 Budget.


Government consults on 'radical reform' of workplace entitlements

The Government has launched a consultation on plans to introduce a new system of parental leave and extend flexible working rights from 2015.

Arguing that the current regulations are 'too rigid' and 'outdated', ministers claim the proposals set out in the `Modern Workplaces' consultation will give parents greater flexibility in the workplace.

Yet business groups have expressed concerns over the plans, with some suggesting that small firms will struggle to administer the proposed changes.

Under the parental leave proposals, the existing 18 weeks' continuous maternity leave and pay will be protected, as will the current two weeks of paternity leave and pay.

However, the existing entitlement to a further 34 weeks' maternity leave would be reclassified as 'flexible parental leave', which will be available to either parent on an equal basis. The existing entitlement to a further 21 weeks' maternity pay would then be reallocated as 'shared parental pay'.

The Government proposes that four weeks of parental leave and pay would be reserved for each parent (to be taken in the first year), while the remaining 30 weeks of additional parental leave would available to either parent - of which 17 weeks would be paid and can be broken in blocks between parents.

The consultation will also look at extending the right to request flexible working to all workers who have been with their employer for 26 weeks.

The Federation of Small Businesses (FSB) said it recognised the need for parental reform and flexible working hours, but warns that the latest proposals will hurt small firms.

'For a small firm, organising cover and workloads for a member of staff that has decided to take chunks of parental leave from work – not a continuous period of time – will be extremely burdensome and difficult to administer,' commented FSB National Chairman, John Walker.

The CBI has also expressed reservations over the proposals. 'We are concerned by proposals to increase the total period of parental leave by another four weeks, given the UK already offers some of the most generous provisions in the world,' said CBI Chief Policy Director, Katja Hall.


ESSENTIAL TAX DATES AND DEADLINES

31 May Last day to issue 2010/11 P60s to employees.

30 June End of CT61 quarterly period.
Annual adjustment for VAT partial exemption calculations (March VAT year end).

For more information on key tax dates and deadlines, visit our 2011/12 Tax Calendar.


QUOTE OF THE MONTH

'Without sustainable lending to viable small businesses, growth, employment and capital investments will all suffer - as will the economy generally.'

John Walker, national chairman of the Federation of Small Businesses, explains why SMEs need access to affordable finance


WEBSITE OF THE MONTH

www.businessgrowthfund.co.uk

Details of the new Government-backed Business Growth Fund


ON OUR WEBSITE

2011/12 tax and financial strategies

Discover how to maximise your business and personal wealth with our 2011/12 guide to tax and financial planning.

The latest hot topics

View our summary of the recent changes to HMRC's penalties and powers.

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