Small businesses brand tax system complex and unfit

● British Chambers of Commerce calls for improved processes for collecting tax

businesses have attacked the UK tax system for failing to provide a level playing field and want more support to stay compliant.

A survey of more than 1,000 firms from across the UK, the vast majority of them small and medium-sized enterprises (SMES), found that nearly 60 per cent think that the tax regime is unfair to businesses like theirs.

The findings of the study, conducted by the British Chambers of Commerce (BCC), largely signal concerns over how HM Revenue & Customs (HMRC) applies the tax rules to different types of firms.

Some 67 per cent of respondents don’t believe that the taxman applies rules fairly across all sizes of business.

Micro firms are more likely to have that view (70 per cent) compared to their medium and larger counterparts (59 per cent).

According to the survey, 64 per cent of companies disagree that HMRC applies tax rules fairly regardless of where the company is domiciled. Again, there is a difference in perception among small and larger firms (67 per cent smaller/micro firms versus 59 per cent medium and large).

The results also found concerns over the quality of service provided by HMRC. One in two (49 per cent) firms don’t believe HMRC provides the support they need to be compliant. This figure is higher for small firms compared to medium and large ones.

Many respondents also expressed frustration that the tax authority underestimated the time and money their small businesses spent trying to keep pace with regulatory burdens and the complexities of the system.

The BCC said it was calling on the UK government to improve HMRC’S service to business, by matching the level of investment in tax avoidance work with funding for support and advice to comsmall panies. Reducing the burden of compliance and improving processes for collecting tax would also go a long way to improve the process for business, the organisation added.

It pointed to a “relentless rise” in upfront business taxes and costs, including business rates, the introduction of Making Tax Digital and changes to pensions auto-enrolment.

Suren Thiru, head of economics at the BCC, said: “These results reflect a strong impression among businesses that the current UK tax regime isn’t 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.

“There is also widespread disappointment over the escalating burden of up-front taxes and costs of doing business.”