UK tax system “stunts small business growth”

Three quarters of small firms believe complex tax rules put brakes on growth

3 March 2010 12:09

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The complexity of the UK tax system is hindering the growth of small businesses, according to a survey by the Federation of Small Business (FSB) and the Institute of Credit Management (ICM).

Three quarters of small firms believe they would be able to grow their ventures if the UK tax system was easier to understand, according to the poll by the business groups.

Over half of respondents said taxable allowances were the hardest tax issue to deal with, while 34% cited income tax as the most difficult. Some 52% said VAT was the easiest tax to get to grips with.

John Wright, national chairman of the FSB, said: “The government must recognise how important small businesses are to strengthening economic recovery. As our survey findings show, three in four would grow their business if the tax system was more simple to understand.

“As we head towards a general election the message from small businesses is clear: the incoming government must think small first and get conditions right for entrepreneurs and small businesses to thrive.”

The survey also revealed that while 10% of small businesses spend more than six hours a week dealing with tax issues, half of respondents said they dedicated less than two hours to it. However, 66% admitted to employing professional help.

However, according to statistics from HMRC, nearly a third of all small businesses fail to take ‘reasonable care’ with their tax returns.

The government is now running a campaign to promote better record-keeping among small businesses and also said that tougher penalties would be introduced for businesses that fail to take appropriate action when dealing with their tax affairs.

The FSB is also calling on the government to cut national insurance contributions following its concern that an employment figures boost around the Christmas period is about to come to an end.

Wright said: "The January employment figures showed a welcome fall in the number of people out of work but we fear the severity of the recession will begin to be evident when the latest figures are released.

"What the UK economy needs is real action to get more people into work. A cut in national insurance contributions would encourage small businesses to take on more staff and grow their businesses.”