Tax too taxing for small businesses

Small firms say the UK's heinously complicated tax rules are a major barrier to growth.

by
Last Updated: 31 Aug 2010

Given that politicians seem to spend all their time obsessing about that daily YouGov opinion poll these days, we hope the results of another new survey don't pass them by: according to the Federation of Small Businesses, 75% of SMEs reckon that they'd have a better shot at growing their business if the UK tax system wasn't so complicated. Lots of them admitted to getting into a tangle over income tax and personal allowances, while one in ten admitted to spending six hours a week grappling with the problem. That's presumably at least 10% of their working lives...

The FSB teamed up with ICM to survey over 1,600 small firms, and the results were very clear: three-quarters saw the tax system as a major barrier to growth. 52% said that trying to get their head round taxable allowances was the biggest problem (we're not surprised - it makes our head hurt too), while 34% plumped for income tax. By contrast, the majority of respondents said VAT was the easiest type of tax of understand - an argument, perhaps, for simple, flat tax rates.

The problem with flat taxes, of course, is that they're essentially regressive. But businesses might argue that since complying with the current progressive regime is so complicated and time-consuming, that's the lesser of two evils. As it is, lots of them have to outsource the problem by hiring specialist advisers - but that can obviously be an expensive business.

Of course, we realise that just because 75% of small firms think they'd grow faster in a simpler tax regime, it doesn't necessarily mean that 75% would actually grow faster in a simpler tax regime. But surely it's the job of Government to remove the roadblocks that are stopping UK enterprises from performing to their maximum potential – and there's no doubt that complying with the current tax regime is currently one of those roadblocks. What’s more, the Government can't really blame that on anyone but themselves.

The FSB reckons this is a clear sign that whoever wins the election must ‘think small first and get conditions right for entrepreneurs and small businesses to thrive.’ Unfortunately, when it comes to cutting unnecessary red tape, politicians aren’t always great at following up their rhetoric with genuine action...


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