As the time of year-end approaches, we all ensure to keep a track of everything that we can do to reduce the number of our tax bills. On average small businesses in the UK spend a lot of time fulfilling the requirements of tax compliance in the UK. However, the increasing tax compliance burden is a complicated procedure for most small business owners. Because of multiple factors that play the role of a hindrance to meeting the requirement of tax obligations for small businesses, people find it hard to do it every tax year.
According to recent research, almost half of the business owners were of the view that the tax rates are challenging to them. They have to prepare and plan a lot to meet certain criteria and tax deadlines as well. This sometimes happens because of the exemption confusion as well. People are not well educated about tax obligations and the understanding is vague in this regard. Moreover, this basic guide will help you to gather information about what is increasing the tax compliance burden and how can you manage it effectively.
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What is the Increasing Tax Compliance Burden?
There are common tax obligations to meet the requirement in the UK that are considered to be quite time-consuming. People are of the view that in the process of meeting tax obligations on time, they do not have enough time to invest in business growth. National insurance contribution, Pay as you earn, and VAT is some of the common examples that an individual has to make if associated with the business world.
After a certain limit of income is crossed, the tax rates turn higher. Because high-income results in putting you in a higher tax band and you will have to pay more in form of tax bills. This increasing tax compliance burden is not appreciated by business owners mostly. This is the reason why most people are caught in finding ways to escape the tax bills. Or at least reduce the amount in their tax bills.
Increasing Tax Rates and Business Growth – What is the Connection?
Around half of the business firms of small size in the UK consider the tax rate as a serious challenge to the growth of their business. According to the research, these people are of the view that the tax rates are increasing every time they grow their money and income, and this has made the pace of business growth slow. The energy and thoughts of planning tax returns and meeting deadlines have drained them so much. That there is no time and energy left to think about better ideas and grow their business.
When it comes to the corporation tax for small size businesses or start-ups, a prominent proportion of people claim that this has hampered their business expansion. Some prominent reports came against the obligation of employers’ national insurance contributions (NICs). On the other hand, the blame goes to the way of VAT similarly.
What is the Effective Way to Solve the Increasing Burden of Tax Compliance?
The tax authority tends to collect taxes as it comes under their primary goal and this is why exactly they are set up. This is imperative to mention here that to keep the presence of law in order in the industry, it is mandatory to track people who are ignoring the tax rules. This will help to sustain confidence in the business as well as the tax system.
An instant failure will be observed in the business world as well as in the tax administration if there is no track of people who are involved in tax avoidance, evasion, recklessness, and ignorance. This makes it very important to focus on the ways to solve the tax compliance problem effectively. We have outlined a few points that can be helpful in this disregard:
Instalment Agreement
When it becomes hard for a start-up or small business to pay the full amount of tax bill, an instalment agreement makes it easy to pay the amount tax bill in episodes. The details of how many instalments are there and how much amount will be paid are usually decided in the instalment agreement.
Ensure to Pay the Accurate Amount of the Tax Bill
You will have to be careful about confirming that you receive the accurate amount in the tax bills. If you have submitted the accurate details in the tax returns and there are no mistakes found, this is usually possible to do. A lot of your tax problems will be resolved if the accurate tax bill is received and you pay exactly what is required. In the case of overpayment of the tax or underpayments, the procedure of tax-paying becomes confusing and more exhausting. Sometimes you even end up paying more than the accurate tax amount.
Full Payment
People often pay the tax amount mentioned in the tax bill right before the tax deadline to avoid confrontation with the tax authorities. The professionals suggest avoiding this practice. As this will make you pay the inaccurate amount of tax and you will be even more burdened. The chances of an inaccurate tax bill are often high. So when you are getting prepared for the tax payments, learn to confront the inaccurate tax amount as well.
The Bottom Line
Now that you have gathered a fair amount of information about increasing tax compliance burden, we can bring the discussion towards wrapping up. There is no denying that the increased tax burden plays the role of a hindrance to business growth. However, tax problems can always be sorted by following the smart ways and having the nerve to confront if the wrong tax bill is received. We hope these few minutes of reading have helped to develop a better understanding of increasing tax compliance burden and tax rates.
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Disclaimer: The information about the increasing tax compliance burden provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.
