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Small businesses prepared to pay for tax simplification

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Small business owners would be willing to dip into their own bank accounts in order to bring about a fairer and less complex tax system, a new survey has claimed.

The poll was carried out by the Forum of Private Business (FPB).

Of those business owners questioned, over a half (57 per cent) said that they would be prepared to pay more for a streamlined tax regime so long as it was easier to understand and delivered genuine rewards.

The survey also indicated that concern over tax avoidance is an issue with many firms. A half of respondents claimed they would be happy to dig deeper for a tax system that treated everyone fairly and that reduced levels of tax avoidance among competitors.

A similar proportion (45 per cent) would tolerate higher tax bills if there were an accompanying reduction in the amount of administrative bureaucracy and red tape involved in complying with the rules.

Elsewhere in the survey, a majority of employers (78 per cent) felt that the complexity of payroll taxes and increases in national insurance contributions deterred firms from taking on more staff.

A further 45 per cent said the tax system hinders financial planning, and 41 per cent believed that it impedes prompt payment. 

Some 57 per cent supported tax incentives to allow businesses to employ more people.

A number said they would like to see taxation rates for employees and the self-employed more closely aligned in any reform of the IR35.

Views on the recent VAT increase were mixed. Almost a half (48 per cent) of respondents felt that the VAT rise would create minimal problems for their business, but 21 per cent said it would have a significant impact. Additionally, 9 per cent believed it would give some competitors an unfair advantage and 6 per cent considered the administrative burden associated with price adjustment to be a barrier.

Commenting on the findings of the survey, Phil Orford, the FPB’s chief executive, said: “The cost of complying with Britain’s hugely complex tax system is such that, if simplification and profitability result, most businesses believe a little more tax would be a price worth paying.

“Clearly, if the Government is serious about stimulating small business growth, streamlining tax administration must be a priority.

“Tax policy directly influences business behaviour. We desperately need reforms that incentivise small business growth by freeing up time and money to invest in future planning and expansion, rather than a system that impedes it, as the present one does.”

The FPB wants to see a radical overhaul of the tax system, including the abolition of business tax reliefs and allowances if corporation tax were to be cut to internationally-competitive rates and if employment taxes (particularly employers’ NICs) were significantly reduced or abolished.