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An overly complex employment tax regime is hindering the UK's economic recovery, according to the country’s businesses, which have backed the merging of the PAYE and National Insurance systems.
The results of a survey by accountancy firm BDO shows that 78% of companies believe burdensome tax regulations are creating a major barrier to attracting new talent.
The research also suggests that the majority (70%) of firms’ financial decision makers would allow political parties’ employment tax policies to influence they way in which they vote for in the next election.
BDO’s head of human capital, David Ellis, claimed that 88% of businesses agree with his employer’s suggestion for simplifying the PAYE and NIC systems.
‘We would like to see the two merged, so that there is just one tax on personal income. This would remove the need for different allowances, rate bands and filing dates,’ he said.
Company bosses told BDO that the complexity of HMRC rules is holding back businesses from offering benefits to employees, including share-based incentive schemes; more than half (55%) of the 126 businesses polled offer no such schemes but believe they attract and motivate employees.
Mr Ellis said that the ideal solution for businesses would be to replace all current schemes approved or registered by the taxman with one arrangement under which share options could be offered to any employee ‘on any terms, and at any price’.
Finally, thirty-four percent of senior executives said they would be more likely to employ additional staff members if taxes were reduced or reformed. They also felt that cash flow would be improved and manpower could be reallocated to such activities as new business.
On average, five individuals in each company spend 5.6 days a month administering employment tax schemes, according to BDO’s findings.
