UK Tax System is Fundamentally Unfair, Say Small Businesses

A survey by the British Chamber of Commerce (BCC) found that nearly three-fifths of respondents think that the UK tax regime is unfair to businesses like theirs.

The BCC surveyed more than 1,000 UK firms, of which 96% were SMEs. In response to their findings they have voiced concerns over how HMRC applies the tax rules to different types of firms and how the compliance of businesses is supported.

  • 67% don’t believe that HMRC applies tax rules fairly across all sizes of business (micro firms are more likely to have that view (70%) compared to medium and larger small businesses (59%))
  • 64% of companies disagree that HMRC applies tax rules fairly regardless of where the company is domiciled (this number rises to 67% amongst micro firms but drops to 59% among medium and larger small businesses)
  • 49% don’t believe HMRC provides the support they need to be compliant (micro firms, 51%, and medium or larger firms, 42%); many respondents expressed frustration that HMRC underestimated the time and money small businesses spend trying to keep pace with regulatory burdens and the complexities of the system

The ‘onerous cost and administrative burden’

The BCC is now calling on the government to improve HMRC’s service to business by matching the level of investment in tax avoidance work with funding for business support. The business body believes that reducing the burden of compliance and improving processes for collecting tax would go a long way to improve the process for business. It refers to the “relentless rise” in upfront business taxes and costs, alongside the costly introduction of Making Tax Digital and changes to auto-enrolment, as issues “adding to the already onerous cost and administrative burden on firms.”

The BCC is also reiterating its call for the Government to pledge to introduce no new input taxes and other significant costs on businesses for the remainder of this parliament.

Suren Thiru, head of economics at the BCC, said the findings showed that businesses don’t believe the current UK tax regime is a level playing field.

“When it comes to compliance, there is a tendency for HMRC to see smaller businesses as low hanging fruit and as a consequence they feel under the constant threat of being called out for getting things wrong in a tax system that has grown ever more complex.

“In contrast, action to tackle persistent compliance issues among a small minority of firms remains frustratingly slow.”

He said there is “widespread disappointment over the escalating burden of up-front taxes and costs of doing business in the UK,” and that at a time of heightened uncertainty, this burden had proved to be the tipping point for many smaller firms.

“HMRC must step up efforts to provide better support to smaller businesses to get their tax right, rather than simply pursuing and enforcing penalties,” he said.

If you’re struggling with tax, the Get Help with Tax page signposts available help, but hiring an accountant is the safest way to ensure you’re compliant (and retaining as much of your hard-earned money as possible!)