Funding Prosperity: Creating a new Tax System in Wales

In April 2019 income tax will be devolved to the National Assembly for Wales, part of a process of tax devolution leading to the first Welsh taxes to be levied since the days of Llewelyn the Great in the 13th Century. Along with key business taxes such as non-domestic rates, stamp duty land tax and landfill tax, how the Welsh Government chooses to use these new powers will have a significant impact on SMEs across Wales. But it’s not just the rates and bands of these taxes that are important. It’s also how they are administered. Previous FSB research in our report Taxing Times found that the average UK business loses three weeks a year to tax administration and spends around £5,000 on tax
administration. 55 per cent of businesses also feel uninformed about potential tax reliefs on offer that could benefit their business.

To combat this, many turn to professional advisors to get their taxes right. We found 77 per cent of firms did this with accountants being particularly important to businesses and in relation to more technical taxes also legal advisors. In this context, how Welsh Government goes about administering its devolved taxes, and how it works with tax professionals, is crucial to reducing the administrative
impact.

With proposals such as a tourism bed tax and a vacant land tax being suggested in some quarters, we felt it was important that FSB Wales outlines the needs and issues for small businesses in dealing with devolved taxes. This research provides this overview and it’s clear that the initial experience has been mixed. On the one hand, many simply aren’t aware that taxes have been devolved. This is a concern as it’s an issue that will impact on almost every business once income tax is devolved.

On the other hand, those that have experienced the newly devolved Welsh taxes have largely positive things to say about the Welsh Revenue Authority (WRA). We hope this report helps Welsh Government and the WRA to continue its positive start and shape a tax administration system that works for Wales’ 250,000 micro, small and medium sized businesses.