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Does HMRC let big firms off lightly? 58% of small businesses think the UK tax system is unfair

2-minute read

Does HMRC let big firms off lightly? 58% of small businesses think the UK tax system is unfair
Sam Bromley

Sam Bromley

8 May 2019

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A survey carried out by the British Chambers of Commerce has revealed that businesses think the tax system is “fundamentally unfair”.

  • Spring Statement 2019: what it means for small businesses
  • 7 self-employed tax changes to know about for 2019
  • A guide to Self-Assessment tax returns for small businesses and the self-employed
  • How much business insurance do I need?

It also found that businesses want and need more support to stay compliant, as new rules and regulations like Making Tax Digital are constantly being introduced.

3 in 5 businesses think the tax system is unfair

The British Chambers of Commerce surveyed over 1,000 businesses across the UK to get their view of the tax system.

Most of the respondents were small- and medium-sized firms and an overwhelming number of them (67 per cent) said they don’t feel HMRC applies tax rules fairly across all businesses.

Micro firms were more likely to have this view than their larger counterparts – which suggests that the smaller the business, the higher the chance they’ll think the system is broken.

Half of businesses say HMRC doesn’t give them enough support

The deeper issue is that small businesses are lacking support at the moment, whether it’s on Brexit preparations or their tax affairs.

49 per cent of firms said that HMRC doesn’t give the support they need to stay compliant with the tax system. And that’s a problem, as businesses are expected to keep up with big changes.

According to the British Chambers of Commerce, lots of respondents mentioned they’re frustrated with HMRC, because it has underestimated the amount of time and money small businesses need to spend on staying up to date with the rules.

Funding for guidance should match that seen in tax avoidance work

The British Chambers of Commerce are calling on HMRC to match the level of investment in its work to reduce tax avoidance with “funding for support and advice to businesses.”

Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “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.”

He went on to say that the lack of guidance, along with the costs that come along with keeping up with the rules, is hindering the ability for British businesses to “get on and invest, train their staff, and compete on the global stage.”

3 tax updates small businesses and the self-employed should know about

Read our previous reports on some of the key tax issues facing small businesses and the self-employed:

  • new off-payroll working rules in the private sector – if you’re a business that hires independent contractors or freelancers, or you’re an independent contractor or freelancer yourself, you should stay up to date with HMRC’s announcements on this rule change
  • the 2019 loan charge – this has hit thousands of contractors with a retrospective tax, which many MPs have called unfair
  • Making Tax Digital – if you’re a VAT-registered business with a taxable turnover of £85,000, you now need to keep digital records and use compatible software to send returns to HMRC. Read our comprehensive guide to find out how

Do you think the UK tax system favours larger firms? Let us know in the comments below.

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