That does not strike me as particularly vast in the context of the enormous and rapidly growing volume of regulations with which business has to cope.
At the same time I see the health secretary has rushed to endorse the Fabian Society’s recommendation that employers, including small businesses, should be forced to split their PAYE deductions between the part relating to the NHS and the part relating to everything else.
The government has of course already imposed on small businesses the need to cope with student loan deductions, working family tax credit payments and disabled person’s tax credit. It appeared completely disinterested for a long time in relieving the worry amongst many small firms as to whether the national minimum wage legislation applied to directors.
The government has responded to the pleas to align PAYE and national insurance not by recognising that NI is no longer an identifiable insurance fund (it has to be massively supplemented out of general taxation) and merging it with income tax or even by putting NI onto the same cumulative basis that applies to PAYE. Instead its version of alignment is to extend NI to benefits in kind, most of which are of course not within the PAYE net and many of which cannot be readily identified by small businesses at payroll time.
But who cares? A bit of extra red tape for small businesses is clearly nothing to Alan Milburn.
It would be interesting to know how much tax is collected by forcing small businesses to complete forms P11D for most of their staff. I doubt that the cost, not only to business but also to the Inland Revenue, is justified. My secretary has just had her PAYE coding reduced to reflect a #40 ‘benefit’. On checking with our accounts department it transpires this was the cost of the firm’s Christmas tree for last year which she bought and for which we reimbursed the cost.
Although I suspect if I had completed the form, being a pragmatist, I would have broken the law and ignored this, as I am aware that the penalty is tax related so that if no tax is due it is a tissue-paper tiger, I have to accept we were required to show the payment on her P11D.
She has had to spend time checking what it is and so has our accounts department. The Revenue, having altered her PAYE coding has to reamend it. What a lot of work over £8.80 of potential tax. Why is it needed?
Because the P11D does not differentiate between payments that give rise to a benefit, those that might do, and those that clearly do not.
Why should the form require information that clearly cannot give rise to a benefit? I suspect because the government believes small businesses are all liars. But that still does not explain why the only way to combat such supposed dishonesty is to raise tax assessments to get people angry enough to challenge them and then explain the facts to the Revenue so they can reverse their decision.
If Tony Blair really wants to relieve small businesses of red tape he should introduce a short bill excluding such businesses from all regulations and prohibiting new regulations being imposed on them by statutory instrument.
He should then go to parliament with a longer bill re-introducing each regulation he believes it is vital that small businesses should be subject to. Each such regulation should have a clause to itself (preferably with its own regulatory impact assessment) so parliament is aware of how many regulations small businesses are subjected to and what it costs them and the need for each can be debated. If future legislation imposes new burdens on small businesses the need for such regulations should similarly be debated by parliament.
A headline bill that abolishes a few regulations may sound good to Tony Blair but it is little more than a pretence while the government continues to introduce thousands of regulations each year, many of which impose additional burdens on small businesses.
Robert Maas is a partner with Blackstone Franks.
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