Partly Cloudy

Partly Cloudy

max temp: 11°C

min temp: 5°C

ESTD 1874 Search

East Anglia: Medium-sized firms being held back by tax system, says CBI/Grant Thornton report

06:00 23 June 2014

Phil Hall of Grant Thornton.

Phil Hall of Grant Thornton.

Constable Photography. St Neots

Medium-sized businesses (MSBs) employing between 50 and 500 people are being held back from further growth and job creation by the UK tax system, according to a survey from the CBI and Grant Thornton.

shares

The research, called “Stuck in the middle”, shows the tax system is acting as a brake on growth, disrupting cash flow, absorbing management time and dampening export ambitions.

MSBs do not have the resources of large companies to navigate tax rules, nor do they receive the targeted support the Government directs at small businesses, the report says.

The CBI and Grant Thornton are calling on the Government to make a number of changes to the tax system which include improving cash flow, widening access to Research & Development tax relief and making it easier for MSBs to export.

Richard Tunnicliffe, CBI director for the East of England, said: “Medium-sized businesses have the most potential to drive business growth and job creation. But all too often their resources, management time and ambitions are being sapped by a tax system which disproportionately hits firms of this size.

“We need our growing businesses to invest, innovate and break into new markets to secure the long-term health of our economy. The UK’s tax system should support these entrepreneurs to do this but in many cases it is actually working against them.

“The Government must urgently review rules around R&D investment, international tax requirements and take steps to stop MSBs from being treated like large companies when it comes to corporate tax payment.”

Phil Hall, tax partner at Grant Thornton’s Ipswich office, added: “As the UK’s economy continues to emerge from the recession and gather pace, it is vital that businesses do not face administrative burdens that impede their growth.

“This is especially true for MSBs which make up just 1.8% of businesses but employ 16% of the UK’s workforce and generate nearly a quarter of private sector revenue.

“According to Grant Thornton research, 45% of MSBs said tax was a factor in slowing down their commercial decision making, while half of respondents (51%) said they spend ten hours a month (120 hours per year) on tax management. In particular, MSBs report difficulties in getting through to HMRC on the phone and then finding the correct person to deal with their request.

“The MSB community often struggles to find a voice, yet when asked they have a lot to say, with tax complexity regularly cited as a major barrier to their growth.

“We need this dynamic segment of business to fulfil its potential in order to drive UK growth as a whole. Policy makers are beginning to recognise this and would do well to take heed of the issues uncovered during our research and our simple proposals that would mitigate these barriers.”

The CBI and Grant Thornton are calling on the Government to:

: : Raise the threshold for the Quarterly Instalment Payments system from £1.5m to £5m. Under the current tax system, when a business’ annual taxable profits reach £1.5m it has to pay tax up front on a quarterly basis instead of annually. Many MSBs are caught by these rules even though they don’t have the cash reserves to manage them, diverting their finances away from investment.

: : Change the SME R&D tax relief to allow all growing businesses to benefit as long as they do not have a controlling investment stake from a larger company. Under the current tax rules if a business is more than 25% owned by another company, despite not being a controlling stake, they do not qualify for the SME R&D relief so the Government should raise this level to 50%.

: : Raise the threshold for exemption from transfer pricing rules from firms with less than 250 employees to firms with up to 500 employees. We should be encouraging MSBs to break into new markets to export their goods and services abroad but as businesses become more established in overseas jurisdictions, the tax burden increases, particularly transfer pricing requirements.

: :Roll out HMRC proposals to provide a designated named HMRC official to the largest MSBs, on a demand basis, as soon as possible and in the meantime improve digital communications through emails and live chats.

Phil Hall added: “Looking more broadly at the tax system, the Government has set out a sensible plan to reduce corporation tax. However, this is not the only tax which businesses pay, so the Government should replicate this strategy to reduce the overall burden facing businesses.”

shares

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other East Anglian Daily Times visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by East Anglian Daily Times staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique East Anglian Daily Times account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

Alex Till of Menta.

Enterprise agency Menta has launched a new Digital Enterprise Engagement Programme (DEEP), offering newly formed local businesses and those who are self-employed access to free digital training courses.

Solar farm. Library image.

A proposed solar park in Wix has been tipped for approval by council planning officers.

The headquarters of Realise Futures in Ipswich.

Ipswich-based social enterprise Realise Futures has won a contract to provide supported employment services for adults with disabilities across a wide area of Essex.

Stage 5 of the Womens Tour passes through Onehouse on their way to Bury St Edmunds last year

Schoolchildren will also be involved in an evening of activities in Bury St Edmunds ahead of the start of a major women’s cycling event.

Paul Rous, of Bruisyard Hall, has launched a tech startup venture with Mark Pearson

A Suffolk entrepreneur has teamed up with a top technology investor, who made millions from a website he created with just £300, to help finance new ideas.

Cloud telecoms company X-on has launched Cuube, a new online communications services platform.

Cloud telecoms company X-on, based at the Framlingham Technology Centre, has launched Cuube, a new online communications services platform.

Jeremy Goulding, front, left, chief executive of Wheatley, is congratulated by Innovatioin Martlesham chair Ian Buxton on winning the first Innovationi Martlesham competition. Also pictured, from left, are Paul O'Brien of BT, Jane Bromley of Wheatley, Mike Ward of Wheatley and Mohamed Abdel-Maguid from University Campus Suffolk.

Software company Wheatley has been named winner of a new competition staged by Innovation Martlesham, the cluster of hi-tech companies based at BT’s Adastral Park research site, near Ipswich.

Total unemployment in the UK has reached a near seven year low, official figures showed today.
Photo: Philip Toscano/PA Wire

Unemployment in the UK has continued to fall and a record 31million people are in now work, according to the final labour market figures before the General Election.

The Nestle Purina plant in Sudbury.

KitKat, Nescafe and Shredded Wheat maker Nestlé said today that first quarter sales had been boosted by an earlier Easter, but with growth dented by currency changes after the Swiss central bank’s shock decision to lift a cap on the franc.

Most read

Most commented

Topic pages