Business tax compliance costs £15 billion a year

An increasingly complex tax system is costing UK businesses an estimated £15.4 billion a year in compliance, according to a report from the National Audit Office (NAO).

HMRC's cost of collecting tax has risen by £563 million over the past five years due to added complexity in the system plus investments in staff and IT.

During this period, the government's tax yield rose by £113 billion in real terms, said the NAO.

HMRC estimates that compliant UK businesses incur costs of £15.4 billion each year in meeting around 2,500 obligations across 27 policy areas. These include £6.6 billion of fees paid to agents, accountants and other intermediaries, £4.5 billion of acquisition costs, such as software, and £4.3 billion of internal costs.

The report warned that HMRC is underestimating these costs as it does not take into account all taxpayer obligations.

Frank Haskew, Head of Taxation, at the Institute of Chartered Accountants in England and Wales (ICAEW), said:

'This report highlights how the UK's increasingly complicated tax system is saddling businesses and HMRC with extra burdens and costs, which are growing in real terms. The report also substantiates our concern that the cost to businesses of complying with their tax obligations is likely to be understated.'

Internet link: NAO ICAEW