Most SME businesses in the UK are apprehensive when it comes to the topic of taxation. There seems to be a general consensus that the tax rates are unreasonably high and the varying tax bands can make things complicated, but then a vast majority perceives taxes as a necessary evil that the economy cannot survive without. ย ย
What is really surprising, however, is the fact that only a few business people in the UK have been strategic and clever to understand the tax system in detail, mostly by utilizing expert tax accountants, at how they can leverage tax relief benefits in their pursuit for sustainable growth. Things started to get confusing once again when the uncertainty surrounding Brexit kicked in. Review our Brexit Checklist to prepare your business.
The Post-Brexit Fever ย
In the process of strategizing on how they will cope in the post-Brexit economy, UK business owners have realized how important it is to understand the country’s tax system. More than ever before, everyone now wants to know what is in the system for them. Businesses want to know how tax relief works, which expenses are allowable, and every other relevant detail. ย The government, on the other hand, has moved with speed to counter the looming tax crisis by tweaking the tax system in favour of the SME and mid-market businesses. Surprisingly, though, many businesses are yet to capitalize fully on this inviting development. Why so? Well, because the tax system is too complex for non-experts to comprehend. That’s why our in-house expert tax accountants have taken it upon themselves to break down things for you. ย ย ย
The Aspects of Business Growth that Tax Incentives Can Impact ย
One of the Big Four Accounting firms in London recently conducted a study on the preparedness of the SME and mid-market businesses to grow in 2019, particularly with respect to tax and Brexit. The firms found out that about 75% of these businesses do not include tax benefits as a key driver in their future growth plans. And even the few who seem to understand how tax relief can aid business growth, they only relate with the job creation and investment aspects of it. ย ย
Speaking of job creation and investment, the study revealed that about 94% of businesses are already positioning themselves to benefit in terms of SEIS, EIS, and additional tax relief for employee training. What they fail to understand is that the untapped potential of tax incentives is much more than that. If optimized, it can help in with the core aspects of business growth, including regional development, innovation, and productivity. ย ย ย
The main takeaway point from this survey is that the need for more understanding of tax reliefs and incentives on offer is bigger now than ever. It is clear now that businesses need help in identifying the growth opportunities that lie within the existing tax framework. And even as they struggle to find ways of linking tax incentives to specified business goals, it is evident that the existing knowledge gap is too big for them to bridge on their own. It is always, therefore, recommended to search for a competitive Accounting firm nearby or for expert Accountants in London, who can help maximize the utility of these tax incentives. ย ย
Complexity in the UK Tax Framework ย ย
For the study, 1000 SME and mid-market businesses with an annual turnover in excess of 10 million were sampled from different industries across the country. Of these, 87% appreciate that to an unspecified extent, tax incentives ought to be among the key considerations when making business decisions. Only about 27% of them confirmed that they were maximally benefitting from the incentives but still claimed that there is too much complexity in the tax system. ย ย ย
However, higher growth businesses appear to be more prepared to benefit from tax incentives than moderate growth businesses. As a matter of fact, the above figure would shoot from 27% to 75% if the higher growth businesses were to be analyzed independently. ย ย ย
About 820 of the businesses were drawn from the private sector, most of which are resource-constrained. Even as they acknowledge that the right incentives are there, SME and mid-market enterprises are counting on the simplification of the tax system in order to make the most out of them. The businesses appreciate the government’s recent attempts to overcome the taxation bottlenecks, but 63% of them still feel that the government hasn’t done enough. ย ย ย
Fast and Moderate Growth Attitudes ย
The report by KPMG also addressed the growth expectations for different SME and mid-markets businesses, especially in regards to fast and moderate growth. The analysis showed a much-skewed result, with a whopping 78% of higher growth businesses supporting the claim that the current tax system supports growth, while a whopping 82% of their moderate growth counterparts disagreed. This is a serious attitude contradiction that remains to be analyzed further. ย ย ย
All said and done, the government and the business world need to engage more with each other and with the tax system in order to find a lasting solution to this complex problem. That is the surest way of driving growth from the tax system through to business in the UK.
Clear House Accountants are specialist the leading accountants in London, our in-house Tax Accountants have been working with the tax system for many years and are trained in helping businesses utilize maximum value from the tax system and the variety of tax incentives in place. Speak to us to see how we can add value to your business.
