The research, which polled businesses from across the UK, found that firms are feeling frustrated by the perceived lack of action from the government and HMRC on tax evasion and avoidance. They feel held back by the complexity of tax law and red tape, and are calling for certainty in order to invest, grow and boost productivity.
Fairness in the system
According to the BDO poll, fairness in the system should be at the top of the Chancellor’s agenda in today’s speech. Almost half of businesses surveyed said they want the Government to tackle tax evasion head on, with a third saying it should be HMRC’s number one priority in the next 12 months.
Almost 40 per cent of business leaders also want business rates reform. More frequent valuations of ‘rateable’ property values will make business rates fairer and more reflective of economic conditions. The fact that businesses are paying against April 2008 valuations undermines the principle that business rates are related to the value of property, with current costs stifling much needed investment.
Simplification and cutting red tape
The burden of red tape continues to be the biggest area of contention for businesses, with almost half (47%) stating it is the largest obstacle to growth.
In response, 55 per cent of firms are specifically calling for simplification of payroll taxes, in the form of an alignment of National Insurance and Income Tax, to help reduce the administrative burden and help eliminate concerns of facing penalties for getting it wrong. It is hoped, given the Office of Tax Simplification’s (OTS) recent recommendations, a full and informed debate on this reform can now commence.
BDO believes the Chancellor should also stand up in support of the property sector, which was hit hard by a hat trick of measures in the Autumn Statement, and introduce a moratorium on property tax measures to allow the sector to recover from what has been a testing decade.
Firms said announcements such as a freeze on corporation tax changes until 2020 would be welcome to give them some certainty for future planning.
However, for 39 per cent of businesses polled, the uncertainty of Brexit has become a big problem. The Chancellor could add to this uncertainty by announcing a potential Emergency Budget in the summer should the UK vote to leave the UK.
The Corporate Tax Road Map, due to be announced in more detail today, which will give a step-by-step guide to business tax over the next five years, will provide some stability to the market, allowing businesses to plan and drive investment for sustainable growth.
However, BDO believes the road map could also come with its own Brexit caveat and that Osborne may say it will have to go under review again if the vote results in a win for the ‘out’ camp.
David Brookes, tax partner at BDO, says: “It is clear that businesses up and down the country want fairness in the system, a reduction in red tape and certainty of a future worth investing in. None of these are unreasonable requests but the Chancellor has a difficult task ahead of him.
“With businesses struggling with the complexity of UK tax law, it’s important this Budget focuses on tax simplification and on positive incentives to invest and grow and boost productivity.
“The introduction of a capital allowance for digital infrastructure (to include investment in automation and online control systems) and an increase in the Annual Investment Allowance until 2020 (for expenditure on plant and machinery) would be a step in the right direction, helping to boost productivity and drive future growth.”