Unfair tax system: 49% of small businesses feel they lack support

07/06/2019

A new survey by the British Chambers of Commerce (BCC) has shown that 67% of small businesses feel that HMRC tax rules are not being applied fairly across different sized businesses.

Of over 1,000 SMEs surveyed across the UK, more than half (58%) also felt that the UK tax regime was unfair to businesses like theirs. This percentage increased as the size of the company got smaller, with 70% of micro-firms holding this view.

This correlation suggests that the burden of a complex and unforgiving tax system is having a noticeable impact on the smallest, and often most vulnerable, UK companies.

What makes the tax system unfair?

One reason the tax system is viewed as unfair is that smaller businesses are often more vulnerable to being persecuted for noncompliance.

“When it comes to compliance,” explains Suren Thiru, Head of Economics at the BCC, “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.”

As well as the pressure of correctly navigating the tax systems, small businesses will also be feeling the strain of rising taxes alongside other costs.

Factoring in high business rates, the costs associated with the introduction of Making Tax Digital and changes to auto-enrolment, it’s unsurprising that there are prevalent concerns amongst smaller businesses struggling to manage their financial and administrative burdens.

A large number of respondents expressed their frustration that HMRC seemingly underestimated the time and money it took small businesses to keep pace with regulatory burdens and a complex system.

What’s the solution?

The BCC is calling for more investment in the support provided to these businesses.

With 49% of all businesses surveyed reporting that they felt the support they needed to maintain compliance was not available, it’s clear that the current system is creating confusion.

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

“This should include matching investment in frontline HMRC help towards SMEs, with their work on non-compliance and tax evasion.

“More also needs to be done to address the escalating burden of upfront costs and taxes to provide firms with much-needed headroom to get on and invest, train their staff, and compete on the global stage.”

Do you find complying with the current tax system a struggle? What support measures would you like to see being introduced to help small companies? We’d love to hear your thoughts in the comments below!