Small companies on brink of tax revolt?

DanMartin · Jul 11, 2008

The Professional Contractors Group has today made a stinging attack on the UK's tax system. It claims that small business owners are so unhappy with the inconsistency and uncertainty that many may soon chose to refuse to not comply with their legal obligations. Is this something you're considering? What do you think about the state of the tax regime? Vote in the poll above and add your comments below.

JoyDivision · Jul 11, 2008

I have just been told by an ex IR employee friend that I have been stupid declaring all my jobs

.

I think the entire country will start a mass protest soon with the huge amount of tax we are paying on fuel etc.

spigwell · Jul 11, 2008

I don't have any real issues with the tax system, or income tax. I do have major issues with the VAT. It is a massive downside to owning a small business due to the way it is conducted. Someone who earns £500 or so over the vat threshold is liable to pay vat on the total amount of revenue not just the £500 over the threshold. This has a major effect on stifling potential growth as the amounts payable are large compared to very little income small businesses near the threshold are generating. A farer way in my opinion would be to have a vat allowance, so the first £60k is vat free and vat would only be payable on amounts over that. Just my view.

Gary

graemepirie · Jul 11, 2008

I would dearly love to see a revolt over tax. Government need to realise that WE build these buisinesses often from nothing, and always DESPITE rules, regulation and red tape. We are seen as cash generators for the government.

It's all very well to say that tax is needed to provide services, I could accept that IF I saw cost effective services being provided and waste being eliminated, but all I see is new quangoes appearing sticking their noses into OUR business. Personally I think (other than a bit of necessary legislation to protect people), government, and councils, should have no role in business - take training for example - who knows better what training our employees need - us or government?

I'm also constantly stuggling to recuit against the benefit state - "I can't work or they'll cut my money.." - it's not THEIR money - it's MY tax!

As for VAT, I totally agree with the post above. The current VAT regulations stifle growth of small businesses in this country. I wrote a paper (which my local labour MP agreed with) and got a woolly and meaningless reply from the treasury saying that VAT was controlled by the EU.....

adventurelife · Jul 14, 2008

The country needs tax so that we can have services. I do not think anyone will have and issue with paying tax in a fair and constructive manner.

What I object to is the hugely over complicated tax system that ensures we all get something wrong and have to pay bookkeepers and accountants to manage something that should be very simple.

As for VAT I am a small business that falls into the TOMS vat regs ( Tour Operators Margin Scheme) most accountants struggle with this never mind the business owners.

The whole system needs root and branch reform but it will never happen under any of the current political parties.

Mark Lee · Jul 16, 2008

I think it's dangerous to talk up the idea of deliberate non-compliance. That would lead to a downward spiral and even more unbalanced powers for HMRC than we are already facing. Having said that, I recently explained (in a detailed article for Taxation magazine) why, after 25 years and reaching what I considered to be the top of my profession, I consciously decided to give up giving tax advice. Given my past roles in the profession this has been described as a sad indictment of the tax system.

In summary my reasons were focused largely around the increasing degree of frustration I felt with developments in tax legislation. I didn't want to struggle any longer to keep on top of the constant tax changes, many of which seemed capricious, illogical and in danger of bringing our tax law into disrepute. I hated the caveats I felt it necessary to give to clients when I was being paid for my advice. If there were choices to be made I wanted to be able to indicate what I would do if I was the client, but I was finding that increasingly difficult to decide.

I'm sure that my frustrations were a direct consequence of three key developments in our tax system.

1 - The ever increasing complexity of our tax system that causes inequalities and inconsistencies.
2 - The 'doublespeak' of politicians and civil servants as regards our tax system
3 - The prospect of increased powers for HMRC without adequate safeguards for taxpayers.

Different people will react differently to such developments.

adventurelife · Jul 16, 2008

Mark Lee said:
I think it's dangerous to talk up the idea of deliberate non-compliance. That would lead to a downward spiral and even more unbalanced powers for HMRC than we are already facing. Having said that, I recently explained (in a detailed article for Taxation magazine) why, after 25 years and reaching what I considered to be the top of my profession, I consciously decided to give up giving tax advice. Given my past roles in the profession this has been described as a sad indictment of the tax system.

In summary my reasons were focused largely around the increasing degree of frustration I felt with developments in tax legislation. I didn't want to struggle any longer to keep on top of the constant tax changes, many of which seemed capricious, illogical and in danger of bringing our tax law into disrepute. I hated the caveats I felt it necessary to give to clients when I was being paid for my advice. If there were choices to be made I wanted to be able to indicate what I would do if I was the client, but I was finding that increasingly difficult to decide.

I'm sure that my frustrations were a direct consequence of three key developments in our tax system.

1 - The ever increasing complexity of our tax system that causes inequalities and inconsistencies.
2 - The 'doublespeak' of politicians and civil servants as regards our tax system
3 - The prospect of increased powers for HMRC without adequate safeguards for taxpayers.

Different people will react differently to such developments.

Hi Mark

Sorry to hear you have given up on the tax advice. You blogs on EC were some of the most usefull I have read on there over the years.

If guys like you are saying what you have above it is obviously much worse than what us small business owners thought.

Dawg · Jul 16, 2008

And what form is this revolt going to take? Refusing to pay and having your assets sequestered? Going to prison before/after the government takes your assets? Dream on. No-one is going to do anything at all. Labour will lose the election; the Tories will inherit such a bad economic state that taxes will have to go up, and the Dim Labs will whinge from the sidelines as normal.
Greater electronic surveillance means that the black economy and tax evasion become more difficult, the power of force as used by the state to ensure it's revenues are protected will continue.
No-one is proposing a simple efficient tax system. No-one is proposing a welfare state that acts as a safety net instead of as a cradle to grave comforter/nanny.
And unfortunately no-one is selling futures in hemp rope, and Dummies' Guides to building gibbets.
To quote Sir Richard Mottram, Permanent Secretary to the Cabinet:
"We're all f*cked. I'm f*cked. You're f*cked. .... We're all completely f*cked." (2002)
The UKBF filters will add asterisks to the naughty words. Funnily enough Sir Richard also said: "Our note-takers have trouble with asterisks."

Mark Lee · Jul 16, 2008

Many thanks for your kind words - appreciated. I found the perfect compromise though. I now run a Network of independent tax advisers. They give the tax advice and I focus on building the business. This means I also still have good reason to continue writing my blogs and posting on forums like this. Indeed, now I can do so with more independence myself and that's a good thing too.

quikshop · Jul 16, 2008

JoyDivision said:
I have just been told by an ex IR employee friend that I have been stupid declaring all my jobs .

Really??

JoyDivision said:
I think the entire country will start a mass protest soon with the huge amount of tax we are paying on fuel etc.

There is going to be no revolt, what purpose would it serve? The Government couldn't back down (again) so the only possible outcome is for HMRC to gain more powers to crack down on non-compliance.

Or more to the point, Gordon Brown couldn't do yet another economic U-turn otherwise he's in danger of over-taking himself U-turning over inheritance tax, 10p tax, non-dom tax, and planned U-turns on retrospective car tax, fuel escalator tax...

Actually having just typed that, all you need is the support of between 40 - 50 Labour MPs to scare the willies out of him and force another U-turn. You don't need a revolt, you need good old fashioned lobbying

graemepirie · Jul 16, 2008

Dawg said:
And what form is this revolt going to take? Refusing to pay and having your assets sequestered? Going to prison before/after the government takes your assets? Dream on. No-one is going to do anything at all. Labour will lose the election; the Tories will inherit such a bad economic state that taxes will have to go up, and the Dim Labs will whinge from the sidelines as normal.
Greater electronic surveillance means that the black economy and tax evasion become more difficult, the power of force as used by the state to ensure it's revenues are protected will continue.
No-one is proposing a simple efficient tax system. No-one is proposing a welfare state that acts as a safety net instead of as a cradle to grave comforter/nanny.
And unfortunately no-one is selling futures in hemp rope, and Dummies' Guides to building gibbets.
To quote Sir Richard Mottram, Permanent Secretary to the Cabinet:
"We're all f*cked. I'm f*cked. You're f*cked. .... We're all completely f*cked." (2002)
The UKBF filters will add asterisks to the naughty words. Funnily enough Sir Richard also said: "Our note-takers have trouble with asterisks."

Well said - except that I disagree that taxes have to go up when the tories get in. Brown has doubled taxes. The taxpayersalliance have identified billions of £ of waste without really looking.

All any government have to do is live within their means the same way as we all do, and if their income goes down then they have to cut their cloth to suit. Just look at all the stupid jobs they've created in the civil service & it's easy to take a knife to it WITHOUT affecting the services we want (although I'd certainly like to take a knife to NHS & Education beaurocracy as well).

Reduce the tax burden and benefits significantly and businesses will boom creating employment for the redundant civil servants and the workshy that can't afford their fags and sky any more.

We need to put significant pressure on the Tories over the next 2 years so that they're in no doubt at all what we expect from them. Of course the big question is how.....

CKG · Jul 16, 2008

I know as much about the tax system as I do particle physics.

I just pay the bill the accountant gives me. What happens inbetween is for him to worry about.

So i'm quite happy with it all really. Maybe ignorance really is bliss?

adventurelife · Jul 16, 2008

graemepirie said:
Well said - except that I disagree that taxes have to go up when the tories get in. Brown has doubled taxes. The taxpayersalliance have identified billions of £ of waste without really looking.

All any government have to do is live within their means the same way as we all do, and if their income goes down then they have to cut their cloth to suit. Just look at all the stupid jobs they've created in the civil service & it's easy to take a knife to it WITHOUT affecting the services we want (although I'd certainly like to take a knife to NHS & Education beaurocracy as well).

Reduce the tax burden and benefits significantly and businesses will boom creating employment for the redundant civil servants and the workshy that can't afford their fags and sky any more.

We need to put significant pressure on the Tories over the next 2 years so that they're in no doubt at all what we expect from them. Of course the big question is how.....

The Tories have a natural lean towards less tax, but they are taking over a huge mess and will not have the balls to cut long and hard where they need to. They will talk the talk but they will not deliver, we now have a society where the state makes up such a proportion of the GDP that they are all self serving.

In the last 11 years Labour have sunk and extra £1,229,100,000,000 into public spending. £50k for every household!

What have we got?

Public services that are the best in the World?

Or

Bureaucracy that is so self serving that it is feeding on itself not matter what the political party in charge is called?

The big question is how to stop it , then reverse it ? I for one cannot see any party doing that and although we all say our bit on boards such as this and in the pub etc very few of us will get into politics to change it. I know I would not as I would not last 5 minutes in that jungle.

graemepirie · Jul 16, 2008

You sound like a man after my own heart! Since we're into politics, I don't think we've got a hope in hell of getting a decent government until the party system is abolished. We don't have 650 opinions in the Commons, we have 2 with a load of sheep that vote how they're told to.

We'll only improve matters if we got a system where we can pick an individual to represent us - in other words we're ****ed ;-(

quikshop · Jul 17, 2008

graemepirie said:
I don't think we've got a hope in hell of getting a decent government until the party system is abolished.

What would you replace it with? Surely not a US style system where votes can be bought during campaign fund raising by vested interest groups and the self-serving US Government is being run from an Oil office in Texas.

I think proportional representation would go some way to making peoples votes actually count and make our system more representative, rather than minority parties gaining power as they do at the moment.

graemepirie · Jul 17, 2008

quikshop said:
What would you replace it with? Surely not a US style system where votes can be bought during campaign fund raising by vested interest groups and the self-serving US Government is being run from an Oil office in Texas.

I think proportional representation would go some way to making peoples votes actually count and make our system more representative, rather than minority parties gaining power as they do at the moment.

I know what you mean, I don't know enough about the US system to comment on it, but what I see in this country is basically just 2 parties parachuting in someone from their own group to constituencies and we then end up with one or the other who "whip" "their" MPs into voting the way they want.

I think at the very least it should be mandatory that MPs live in their own constituencies and that all votes are free votes.

I can't stand labour but there's a lot about Cameron that I don't like either. I just want to have the option of voting in someone that will stand for what I want - not the lesser of 2 evils!

adventurelife · Jul 17, 2008

Up here in Scotland we cannot run our own lives so we have a great system of having lots of MPs to look after us

1st level Counselors
2nd level MSP
3rd level List MSP ( they decided one was not enough per area)
4th level MP
5th level MEP

Now I am really happy because I just know that everyone of the above people go to work each day and think " What can I do today to ensure that business is thriving and the state is focusing on ways to cut back excessive waste and spending"

spigwell · Jul 17, 2008

adventurelife said:
Up here in Scotland we cannot run our own lives so we have a great system of having lots of MPs to look after us

1st level Counselors
2nd level MSP
3rd level List MSP ( they decided one was not enough per area)
4th level MP
5th level MEP

Now I am really happy because I just know that everyone of the above people go to work each day and think " What can I do today to ensure that business is thriving and the state is focusing on ways to cut back excessive waste and spending"

In about 100 years time we will all have an MP each and an MEP between 4 of us.

Mark my words, It will happen.

You heard it here first

Dawg · Jul 17, 2008

As detailed in "The Triumph of the Political Class".

(Although there is an argument that it is just new media that are showing the politicos up, and they have always been this venal, mendacious and incompetent.)

MarinaHopes · Jul 18, 2008

Thanks the blog on CE is really a great feature any one can show me any resource about UK tax system ?

graemepirie · Jul 18, 2008

adventurelife said:
Up here in Scotland we cannot run our own lives so we have a great system of having lots of MPs to look after us

1st level Counselors
2nd level MSP
3rd level List MSP ( they decided one was not enough per area)
4th level MP
5th level MEP

Now I am really happy because I just know that everyone of the above people go to work each day and think " What can I do today to ensure that business is thriving and the state is focusing on ways to cut back excessive waste and spending"

Don't you want McBroon back as well?

Now there's a thought.... Independance, rebuilding of Hadrians Wall (thus causing a boom in the building trade), and McBroon sent back as King!!

DanMartin · Jul 18, 2008

MarinaHopes said:
Thanks the blog on CE is really a great feature any one can show me any resource about UK tax system ?

Tax Zone on AccountingWEB.co.uk, part of the same publishing group as UK Business Forums, is a very useful resource.

sparklyscotty · Jul 18, 2008

I have just re-registered my business in the UK after trying to have a legal company in Spain for two years. Under their tax system you MUST pay 275 euros per month regardless of earnings, AND have your accounts done by an accountant on a monthly basis, so ring up at least another 60 - 90 euro per month for their fees. That is before IVA (VAT) which EVERYONE has to pay, and income tax. I´ll take the UK system anyday.

JohnJohn · Jul 18, 2008

I wouldn't say it's overly complicated (I pay an accountant to do it all, hehe). VAT is something that doesn't make much sense to me. Fair enough, I can accept it for consumers, but why charge businesses it and then have them claim it back? It's just a big juggling act. I need to pay my suppliers VAT, my clients need to pay me VAT, they charge their clients VAT...

What's the point? We Zero rate other VAT reg Euro countries, why not do the same to our own? The end result is the same and we would save time and expense in between.

Seriously though, things are changing. It's now quite easy to setup a 100% legal offshore company and pay no tax (other than what you pay yourself into a UK account). We are in the digital age and this is going to become increasingly common.

ianonline · Jul 18, 2008

On my income through my business and temp work, I still don't earn enough to pay tax. Despite that I have voted yes because it is obviously unfair on small businesses. Paying tax when you are just over the limit is the economic equivalent of a punch in the face to a business. The best solution is to buy extra equipment or advertising just before the tax year end to make the business a little less profitable. Also if you get paid cash in hand, just use the cash to buy something and put it down as having used personal funds to buy business equipment.

These kind of actions by a lot of small businesses might be effective as a kind of silent protest because at the end of the day, for governments, it's all about the money.

Fortunately if my business doubles in size I can still can afford to keep below the tax threshold by making more of my personal expenses as business expenses, such as rent because I work from home.

KM-Tiger · Jul 18, 2008

Dawg said:
And what form is this revolt going to take? Refusing to pay and having your assets sequestered? Going to prison before/after the government takes your assets? Dream on.

Yes, not paying taxes isn't going to work. However back in 2006, I did suggest a tax strike - ie paying it but late.

I still think that could work, if a sufficient number of businesses joined in.

Dawg · Jul 18, 2008

Mmm. Not sure how much of a "blip in cashflow" it would make. Some of the blip would be regained by HM paying late(r) which would affect small businesses, discounting the effect somewhat.
I don't have any figures, (and am too bone idle to dance with Lady G to find any), but I am, I'm afraid, sceptical; wearily and disappointedly so, but sceptical.

Back to fantasies of golden lengths of hemp, whilst I sip a Rebel Yell bourbon.

SHAOLIN_SINZ · Jul 18, 2008

CKG said:
I know as much about the tax system as I do particle physics.

I just pay the bill the accountant gives me. What happens inbetween is for him to worry about.

So i'm quite happy with it all really. Maybe ignorance really is bliss?

lol, that is where you are wrongly mistaken.

Its just getting taken for a mug by large scale business men.

and plus you should always ask where the tax moneys going to otherwise your little more than a sheep in society just doing as he is told.

Is that what this countries come to?

Eagle · Jul 18, 2008

Revolt over tax? Non-compliance? What a load of rubbish. The UK populace don't have the balls - they can't even effectively protest over fuel tax...

SHAOLIN_SINZ · Jul 18, 2008

As for this, my main issue with the tax system although i unwillingly pay it for now is its the middle class paying all the taxes and its the high up corporations who spend all the taxes. Not the government.

Infact the tax spent on war would make people sick.

Its just a cycle of keeping people into certain class systems many do not realise because they are so naive and stuck into a state of denial from there business lifestyle, as a business man and internet website marketer for the past 6 years i can clearly see that tax is a very loose term for "protection money". We even have front men like gordan brown and tony blair who work for these organised criminals that being the likes of the rothschilds and the rockefellers im sure some of you know of them.

and the people spending this tax, have killed 1.6 million in iraq then still claim theres bigger terrorists than themselves may i add 90% of those people were innocent.

This is why we need to see the bigger picture and stop funneling the machine which is clearly being wrongly abused.

I am anti fascism nothing else. That is just one example of how the tax is used wrongly.

If people also took a look at the statistics spent on advertising in comparison to education and yes the educational system is run by corporations PLC to be correct then they would realise that really what is happenin is a constant cycle so people are feeding the machine more n more n more, while getting poorer n poorer.

To tell you the truth its the typical rich get richer, poor get poorer.

and is fundamentally wrong in the basics of humanity.

Thats my reality on the tax topic.

SHAOLIN_SINZ · Jul 18, 2008

Eagle said:
Revolt over tax? Non-compliance? What a load of rubbish. The UK populace don't have the balls - they can't even effectively protest over fuel tax...

indeed that would be the result of division....

i feel the negative vibe in this country everyones in a rush to go no where and has no time for another.

give or take the odd few who werent brought up here.

Dawg · Jul 18, 2008

Well Shaolin Sinz has obviously got a close grasp on Neo-Marxian/neocon geopolitics, the welfare/market asymmetry, and it's synergy with vibes, so at ease everyone.
Phew! Sorted. That's a relief huh?

Manchester Secretarial · Jul 19, 2008

JohnJohn said:
Seriously though, things are changing. It's now quite easy to setup a 100% legal offshore company and pay no tax (other than what you pay yourself into a UK account). We are in the digital age and this is going to become increasingly common.

Sounds intriguing. Do tell.

DuaneJackson · Jul 19, 2008

spigwell said:
A farer way in my opinion would be to have a vat allowance, so the first £60k is vat free and vat would only be payable on amounts over that. Just my view.

I don't follow this. You only pay VAT if you've charged VAT. Yes, you are required to register once you exceed the current turnover threshold. But they way you're talking about it is as if it's like corporation tax or something.

I don't think there's going to be a mass rebellion. We're British! But the changes to small business taxation over the past few years make it less attractive to start a business now than it was previously.

I'd love to think that the Tories would bring back the 10k tax-free profits and CGT taper relief, but they wont. Labour brought these in and took all the flak, so it would be silly for the Tories to reverse it. They will get all the benefit in terms of income to the treasury but none of the blame.

spigwell · Jul 19, 2008

DuaneJackson said:
I don't follow this. You only pay VAT if you've charged VAT. Yes, you are required to register once you exceed the current turnover threshold. But they way you're talking about it is as if it's like corporation tax or something.

I don't think there's going to be a mass rebellion. We're British! But the changes to small business taxation over the past few years make it less attractive to start a business now than it was previously.

I'd love to think that the Tories would bring back the 10k tax-free profits and CGT taper relief, but they wont. Labour brought these in and took all the flak, so it would be silly for the Tories to reverse it. They will get all the benefit in terms of income to the treasury but none of the blame.

Being a retailer I have to charge VAT. I have absolutely no say in the matter. Unlike tax as businesses we have no threshold which i feel is very unfair. I think the Vat level is around about 65K before we must by law register. If it was exactly £65k you would be required to pay £11375 to the vat man leaving you with £53625. (less of course what you offset) If on the other hand you turnover £60k then you have £60k left. So for turning over £5000 more than than someone who doesnt put the same amount of effort into building the business you are £6375 worse off.
If on the other hand there was a threshold in place of lets say £60k then the Vat applicable would only be on the £5000 over. That would mean paying £875. That would give the average small business a certain amount of breathing space and also allow the said business to grow without needing to more than triple the initial takings just to break even.

I know that the rebates would need to be addressed but as i say it is only a thought and i believe a much fairer way.

Gary

Mark Lee · Jul 19, 2008

JohnJohn said:
It's now quite easy to setup a 100% legal offshore company and pay no tax (other than what you pay yourself into a UK account).

Whilst it's true that it's easy to set up an offshore company, it is deemed to be resident in the UK if the shares are owned by or on the direction of UK residents. It's profits are taxable here (subject to any relief for double tax) because it is deemed to be resident here.

The idea that you can run an offshore company from the UK and pay tax only on money that is paid into a UK bank account is dangerously naive. Whilst some non doms MAY be able to do this, and even that's not as easy as it was, for most people it's not a realistic possibility.

Jul 23, 2008

The purpose of TAX is to even the incomes of everyone and re-distribute the wealth of the rich tot he poor through public services.

But lets be honest here, the IR does not make a plan about how much money they need and then come up with the taxes. They try and get as much money as they can first and then think of how to spend it.

adventurelife · Jul 24, 2008

PrivateInvestigator said:
The purpose of TAX is to even the incomes of everyone and re-distribute the wealth of the rich tot he poor through public services.

But lets be honest here, the IR does not make a plan about how much money they need and then come up with the taxes. They try and get as much money as they can first and then think of how to spend it.

Unless you get to where the government are now with huge debts and increased borrowing needed. Then the thought process is more about how much in tax can we get to stop this borrowing growth!!

JElder · Jul 25, 2008

We will always have to pay taxes as businesses and individuals.

However, some of the taxation systems have become so complex - especially VAT and income tax - that the cost of complying can be a significant amount in time, effort, IT systems, accountants costs, etc.

A hugely simplified taxation system would be cheaper for the tax payers, cheaper for the government to administer, and make genuine mistakes less likely, but at the potential cost of tax benefits to some small groups.

VAT especially is an annoyance - a huge administrative overhead for companies to act as unpaid tax collectors.

Dawg · Jul 25, 2008

JElder said:
We will always have to pay taxes as businesses and individuals.

However, some of the taxation systems have become so complex - especially VAT and income tax - that the cost of complying can be a significant amount in time, effort, IT systems, accountants costs, etc.

A hugely simplified taxation system would be cheaper for the tax payers, cheaper for the government to administer, and make genuine mistakes less likely, but at the potential cost of tax benefits to some small groups.

VAT especially is an annoyance - a huge administrative overhead for companies to act as unpaid tax collectors.

Agreed. A simplified system would be cost effective, more not less redistributive than the existing system with it's poverty traps. This would also enable a trimming of welfare payments without hurting those in actual need. Thus we would save on tax administration, welfare payments and welfare state administration.
No tax at all on income below, say £13k, and then tax at 15% on your earnings. No allowances, no tinkering, no trying to game the market; just let people keep more of what they earn.

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