Key Administrative Burdens Faced by Revenue’s Small and ...

Key Administrative Burdens Faced by

Revenue¡¯s Small and Medium Sized

Business Customers

Research Unit

DATA - INFORMATION ¨C KNOWLEDGE

March 2008

Contents

1: Executive Summary ......................................................................................................... 1

1.1: Key Findings ............................................................................................................... 1

1.2: Suggestions for Reducing the Administrative Burden................................................ 2

1.3: Approach ..................................................................................................................... 5

1.4: Acknowledgement....................................................................................................... 5

1.5: Outline of Report......................................................................................................... 6

2: The Administrative Burden in Context ....................................................................... 7

2.1: Definition of Administrative Burden .......................................................................... 7

2.2: Comparison of Administrative Burden on SME and Large Business Sectors............ 7

2.3: Administrative Burden in Ireland as a Percentage of GDP......................................... 8

3: Revenue¡¯s Regulatory Responsibility and Simplification Agenda ...................... 9

4: Key Administrative Burdens ¨C Case Study Findings ............................................ 11

4.1: Differentiating Business Costs from Administrative Burden Costs ......................... 11

4.2: Estimated Time Involved Complying with Revenue Regulations............................ 11

4.3: Key Administrative Burdens Identified .................................................................... 13

4.4: VAT Return Obligations ........................................................................................... 13

4.4.1: Issues Associated with VAT Return Obligations................................................... 15

4.5: Third Party Return Obligations................................................................................. 16

4.5.1: Issues Associated with Third Party Return Obligations ........................................ 17

4.6: Professional Services Withholding Tax Obligations ................................................ 18

4.6.1: Issues Associated with PSWT Obligations ............................................................ 20

4.7: Take up of Electronic Services ................................................................................. 21

4.7.1: Revenue On-line Service........................................................................................ 21

4.7.2: On-Line Tax Clearance Certificate Verification.................................................... 21

4.8: Contacting Revenue .................................................................................................. 22

4.8.1: Provision of Revenue Information to SMEs .......................................................... 23

4.9: Issues Relating to Employee/Payroll Obligations..................................................... 24

4.10: Retention of Records for Revenue Audits .............................................................. 26

4.11: Customs & Excise Obligations ............................................................................... 27

4.11.1: Tax Warehouse Stock Returns ............................................................................. 27

4.11.2: Time Spent Preparing Stock Control Returns...................................................... 28

4.11.3: Customs and Excise Audit ................................................................................... 29

4.12: Administrative Activities relevant to Other Government Departments.................. 29

5: Further SME Administrative Burden Studies.......................................................... 31

5.1: Small Business Forum............................................................................................... 31

5.2: Business Regulation Survey 2006............................................................................. 31

5.3: Business Regulation Forum ...................................................................................... 32

5.3.1: Report of the Business Regulation Forum ............................................................. 33

5.4: Establishment of High-level Group on Business Regulation.................................... 34

5.5: EC Action Programme for Reducing Administrative Burden .................................. 34

6: Conclusion ........................................................................................................................ 36

Appendix 1: Profile of Participating Businesses...................................................................... 38

Appendix 2: Time Spent on Revenue Administration Activities............................................. 40

Appendix 3: Completing a bi-monthly VAT3 Return ............................................................. 42

Appendix 4: Completing Annual Return of Trading Details ................................................... 43

Appendix 5: Form 46G (Company) 2006 ................................................................................ 45

Appendix 6: Business Survey Obligations............................................................................... 49

Appendix 7: Revenue¡¯s submission to the Business Regulation Forum.................................. 50

Appendix 8: The Standard Cost Model.................................................................................... 52

1: Executive Summary

Operating a small or medium sized enterprise (SME) involves compliance with a

multitude of regulations imposed by various Government Departments and Offices.

Compliance with these regulations is a priority for the vast majority of businesses.

Revenue has conducted this consultative study with a view to developing a better

understanding of the impact of Revenue regulations on the SME sector and

identifying the key administrative burdens faced by these customers.

Revenue¡¯s Research Unit carried out this study in consultation with four firms

nominated by the Small Firms Association (SFA). The purpose of study was as

follows:

1.

To agree with the nominated SMEs the range of activities they regard as

Revenue administration work.

2.

To quantify the resources required by the nominated SMEs to carry out these

activities.

3.

To suggest practical improvements to simplify, streamline or reduce the

administrative work performed by SMEs based on the information obtained in

the course of the study and its conclusions.

1.1: Key Findings

The issues identified in this case study represent the aspects of administration

associated with Revenue regulation that are perceived to be particularly burdensome

by the participating small businesses. The key findings are summarised as follows:

?

The estimated length of time spent carrying out administrative activities

associated with Revenue regulations ranged from 38 to 51 hours per annum

excluding customs and excise activities.

?

One participant engaged in the manufacture and export of alcohol products

advised that maintaining tax warehouse stock control and management records

involves over 1200 hours per annum.

This considerably increases the

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estimated time spent on Revenue related administrative activities for the

participant in question.

?

Compliance with VAT return and Third Party return obligations and the

impact of Professional Services Withholding Tax regulations on cash flow are

seen as factors contributing significantly to the administrative burden.

?

Perceived duplication in the provision of information to various Government

Departments is time consuming for businesses.

Some of the case study findings are consistent with the work programme emerging

from the recently established High-level Group on Business Regulation. This crossDepartment and cross-Agency forum was set up to drive a programme of

administrative burden reduction across five priority areas identified by the Business

Regulation Forum. Taxation features as one of the priority areas and Revenue is

represented on the Group. The initial programme of work emerging for Revenue

includes consideration of possibilities for data sharing, improved efficiency for tax

clearance verification and simplification of certain tax return forms.

1.2: Suggestions for Reducing the Administrative Burden

The participants made a number of suggestions aimed at easing the administrative

burden associated with the aspects raised as follows:

?

Extending the deadline for the submission of VAT annual return of trading

details and declaration of duty liabilities would ease the issues associated with

compliance (4.4 and 4.11).

?

It would be less burdensome to provide the data required on the VAT annual

return of trading details at regular intervals throughout the year e.g. bimonthly using the VAT3 return or quarterly for traders who file electronically

(4.4).

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?

The submission of third party information is seen as effectively carrying out a

task that is more appropriate to Revenue, and the rationale behind the need for

third party returns should be provided (4.5).

?

An exemption from Professional Services Withholding Tax requirements for

businesses operating below a certain threshold should be considered (4.6).

?

A campaign by Revenue to highlight the availability of a ROS Liaison Officer

in each District in addition to conducting ROS regional seminars for SMEs

should be carried out to increase take-up of the ROS facility (4.7).

?

A communications exercise to increase the awareness of the availability of the

on-line Tax Clearance Certificate (TCC) verification facility among public

bodies should be initiated (4.7.2).

?

Improvements to the telephone service should be considered including an

answering machine facility, dedicated contact persons in the Districts and

Dublin Port (4.8).

?

Issuing guides for small business by post periodically would benefit customers

who do not have internet access (4.8.1).

?

The provision of early advice from Revenue would assist newly registered

small business customers to understand their obligations (4.8.1).

?

P45 notes should point out that delays in issuing P45s and the receipt of

incomplete or illegible P45s result in difficulties when setting up new

employees on payroll systems (4.9).

?

The content of the two publications ¡°Code of Practice for determining

Employment or Self-Employment status of Individuals¡± and ¡°Employed or

Self-Employed A Guide for Tax and Social Insurance¡± should clarify that the

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