Tax and small businesses

Collecting tax is an expensive business. It’s thought to cost around £15 billion to £20 billion a year in the UK, which is one of only three countries out of 43 advanced economies where the cost of tax collection is not dropping.

When Gordon Brown finished his purgatorial stint as Chancellor before ascending to Number 10, the running ‘joke’ among tax accountants was that at least Tolley’s Tax Guide wouldn’t get any bigger. In Brown’s ten years in charge, the tax accountant’s bible almost doubled in size.

For a business owner, it’s not simply the rates of tax that cause frustration. It’s the time and complexity of keeping pace with the incessant technical changes, which inevitably leads to hiring specialist advisers, who aren’t cheap. You could argue that the fees paid to advisers by businesses are yet another tax.

Given the need to win votes, it’s unlikely the forthcoming Budget will deliver the real hard-hitting taxes everyone anticipates. But when National Insurance, Corporation Tax, VAT, Income Tax and Capital Gains Tax (expected to rise to between 22 and 25 per cent) are hiked up and outraged entrepreneurs threaten to pack their bags and live in huts in the Swiss Alps, it’ll be worth asking whether anything has been done to simplify the system itself.

Sure, high earners are feeling particularly hard done by and tend to take up most of the column inches in the national press come Budget day. But as with most stories in the broadsheets and tabloids at the moment (think Tiger Woods, John Terry and Cheryl and Ashley Cole’s marital strife), their grievances don’t have much to do with what interests ordinary people.

While the argument that wealth creators shouldn’t be punished is understandable, it has to be tempered by a recognition of the financial mire this country now finds itself in. Taxes are going to rise for everybody, but if the system itself can be made more user-friendly and not tampered with year after year, start-ups and larger businesses alike will be very grateful.

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