Committee chairman Edward Leigh

Businesses are having their time wasted because the government's tax system is too fragmented, MPs have said.

HM Revenue and Customs (HMRC) needs to integrate its computer systems and reduce the number of times new businesses must register basic details, according to a report published by the Commons public accounts committee on Thursday.

Committee chairman Edward Leigh said new businesses, of which there are around 700,000 set up every year, have to register for each tax as it become due, often at different times.

"The last thing anyone starting a new business wants to do is spend a lot of time talking to the tax man," Leigh said.

"But new businesses are frustrated by having to register separately with HMRC for each and every tax they have to pay.

"This is because the department is hampered in having a separate computer system for each tax. It must push towards a system where a new business registers just once for all the taxes it must pay."

"It is also ridiculous that owners of new businesses are badgered by different parts of HMRC all wanting the same bits of information," he added.

The report pointed out that Australia and Canada ran a single registration system and called for HMRC to provide every firm with a unique tax reference number in order to provide an overview of each business's tax affairs.

The department currently spends more than £33m a year on help for new businesses, according to the committee's report, but such firms still incurred fines for filing returns late.

Leigh said: "It is vitally important that new businesses get the assistance and simplified requirements they need so that, right from the start, they can get their tax affairs in order and are well-placed to continue to comply as their tax affairs become more complicated."

The MPs also called on the government to increase the number of businesses filing returns online. Currently companies can only register for VAT and PAYE via the internet, with around a quarter of them doing so.

The proportion of new businesses filing online was more than 85 per cent in Canada and Australia, the committee said.