Are High Taxes Killing Small Businesses?

[Ned Barker]

Small business owners are dealing with rising costs, higher taxes, and new regulations that make running a business harder than ever. Employer NI contributions, corporation tax, and business rates are all squeezing margins. Is the UK government making it too difficult for small businesses to survive? Should there be more tax relief for SMEs, or is this just part of doing business? Drop your thoughts below.

 

[DontAsk]

There should be more tax, i.e., level the playing field for VAT.

 

[glengraving]

Drop your thoughts below.

It's all good as long as the taxes raised are being used effectively. Implement UBI to give the consumer more buying power. Put the ultra-wealthy into a slow cooker.

 

[martin_shl]

I think increased Employer NI contributions combined with the large shift towards the employee in the balance of power will discourage businesses from taking on more staff. That might cause them to invest more in automation, which could increase the productivity of those businesses, or could cap growth.

 

[MarkOnline]

There should be more tax, i.e., level the playing field for VAT.

Yeah of course, give more to the government to spend wisely, obviously no one else can be trusted to spend money.

 

[Newchodge]

the large shift towards the employee in the balance of power

Even if the Employment Rights Bill is passed without being filleted to satisfy businesses, the balance of power is still 95% with the employer.

 

[Newchodge]

Employer's NI increases are a huge mistake, one of many made by this Chancellor. I am not so worried about the rise from 13.8% to 15%; the drop in the threshold will be crippling. Many small businesses will be protected from this by the increase in the Employer's Allowance, but small businesses who are largely funded by the state (pharmacies, doctors' and dentists' surgeries, nurseries and care homes in more deprived areas, to name a few) cannot get that allowance.

Corporation tax is only 19% for less than £50,000 profit, and 25% over that, compared with 20% PAYE and 8% NI for employees, so that seems reasonable.

Business rates need a complete overhaul.

For other costs, I blam Brexit.

 

[tony84]

Even if the Employment Rights Bill is passed without being filleted to satisfy businesses, the balance of power is still 95% with the employer.

There is definitely another side to this argument though.
When I set up my business, I had no customers, no income and was building up debt. I took the risk, I did the sleepless nights, I went without (because there was no money) - should I not benefit?

More recently, I took on a trainee - he is very good, but he has done something really stupid quite recently. He was trying to be helpful but has opened us up to a payout. As it happens, I can take the hit, but if he had made the same mistake on a week day when other companies were open, I would have been having some sleepless nights. So I am having to pay for a mistake I could not have prevented. I wont hold it against the lad, bar this mistake (which was made with the best intentions), hes very good and is generally making my life easier. But again, if I am taking the hit when things go wrong, should I not benefit when things go right?

Appreciate small business is different from working for a large company where everyone is an employee. But I dont think it is possible to differentiate.

 

[tony84]

I think as a country we need to pick a side (EU or US) and that should be the EU... (here me out).
At the moment, Google, Amazon, Facebook, Starbucks, McDonalds and whoever else all earn money from sales in the UK. But they pay barely any tax in the UK.

Small business can't compete on the economies of scale (there is not much we can do about that), but they also cant compete because the taxes are different. Level the playing field and we might see more income from taxes meaning we can afford to tax small businesses and/or individuals less.

They will still be taxed and it will likely have an affect on inflation in the short term, but longer term the taxes are on optional purchases rather than income.

I dont have all the answers, I am not smart enough for that. But the US moaning about how they buy our food and cars but dont sell enough of theirs (there is a reason for that - its because they are sh.....).

 

[tony84]

I think as a country we need to pick a side (EU or US) and that should be the EU... (here me out).
At the moment, Google, Amazon, Facebook, Starbucks, McDonalds and whoever else all earn money from sales in the UK. But they pay barely any tax in the UK.

Small business can compete on the economies of scale (there is not much we can do about that), but they also cant compete because the taxes are different. Level the playing field and we might see more income from taxes meaning we can afford to tax small businesses and/or individuals less.

They will still be taxed and it will likely have an affect on inflation in the short term, but longer term the taxes are on optional purchases rather than income.

I dont have all the answers, I am not smart enough for that. But the US moaning about how they buy our food and cars but dont sell enough of theirs (there is a reason for that - its because they are sh.....).

that should say "cant compete on the economies of sclae"

Edited it for you - a mod.

 

[Newchodge]

There is definitely another side to this argument though.
When I set up my business, I had no customers, no income and was building up debt. I took the risk, I did the sleepless nights, I went without (because there was no money) - should I not benefit?

More recently, I took on a trainee - he is very good, but he has done something really stupid quite recently. He was trying to be helpful but has opened us up to a payout. As it happens, I can take the hit, but if he had made the same mistake on a week day when other companies were open, I would have been having some sleepless nights. So I am having to pay for a mistake I could not have prevented. I wont hold it against the lad, bar this mistake (which was made with the best intentions), hes very good and is generally making my life easier. But again, if I am taking the hit when things go wrong, should I not benefit when things go right?

Appreciate small business is different from working for a large company where everyone is an employee. But I dont think it is possible to differentiate.

I am not talking about benefit from a small business v benefit from employment. In the employer:employee relationship the employer jas most of the power.

In your example, you could have dismissed the trainee - they could do nothing about it. You could have withheld their wages - they could do nothing about it except take you to court, eventually. They may win but you have the power to do it. The only power the employee has is to not turn up to work.

 

[FreddyG]

At the moment, Google, Amazon, Facebook, Starbucks, McDonalds and whoever else all earn money from sales in the UK. But they pay barely any tax in the UK.

And the answer is easy - except that those in power are not prepared to do the obvious.

These companies do not pay taxes because they extract the money as payments for the use of intellectual property owned by the parent company. This goes to a holding company in Europe (Luxembourg, Switzerland and others) and from there to some South Sea island tax haven.

HMRC would merely have to regard the payment of these licensing fees as an extraction of profits (which in reality is exactly what they are!) and all that shenanigans would have to stop! I think a foreign CGT rate of 35% would be justifiable.

 

[tony84]

I am not talking about benefit from a small business v benefit from employment. In the employer:employee relationship the employer jas most of the power.

In your example, you could have dismissed the trainee - they could do nothing about it. You could have withheld their wages - they could do nothing about it except take you to court, eventually. They may win but you have the power to do it. The only power the employee has is to not turn up to work.

I could have dismissed them, definitely. To be honest, if it were anyone else, I probably would have.
I could have withheld wages, but ultimately I would have had to pay them so whats the point - appreciate there are some dodgy employers out there who would do that.

You cant even out the power and nor do I think you should. If an employer goes too far it affects one person. If an employee does it, it affects the business and other employees.

 

[Mark T Jones]

I think as a country we need to pick a side (EU or US) and that should be the EU... (here me out).

It's 100% valid, and a problem we've given ourselves for about a century.

Until the '50s (ish) you can add the empire as a 3rd prong.

The reason we were initially vetoed from the EEC - and why we never fully 'belonged' always had split loyalties.

Perhaps Trump is inadvertently doing us a huge favour right now?

 

[tony84]

And the answer is easy - except that those in power are not prepared to do the obvious.

These companies do not pay taxes because they extract the money as payments for the use of intellectual property owned by the parent company. This goes to a holding company in Europe (Luxembourg, Switzerland and others) and from there to some South Sea island tax haven.

HMRC would merely have to regard the payment of these licensing fees as an extraction of profits (which in reality is exactly what they are!) and all that shenanigans would have to stop! I think a foreign CGT rate of 35% would be justifiable.

It wont happen though because these companies would lobby their government and the US would then make their own threats. Which lets face it, they can get away with.

 

[FreddyG]

It wont happen though because these companies would lobby their government and the US would then make their own threats. Which lets face it, they can get away with.

But they are not paying taxes in the US either!

This change in the law would affect UK companies as well - they use the same loophole to give taxes the old body swerve! It is one of the hundreds of mechanisms the wealthy use to avoid paying taxes.

They say (and not without justification) that it would put their companies at an unfair disadvantage. As a for-profit entity, you are obliged to act to your own advantage. Just think of all the helicopter money that was handed to companies during the C19 madness! It was free money and we would have been stupid to not take it!

I know that in the long run, businesses suffer from having gross inequities in society. We must have an affluent middle class to sell to. You cannot sell a luxury car to a starving man!

The fault lies in the idiocy of the politicians who create these absurd anomalies.

 

[UKSBD]

And the answer is easy - except that those in power are not prepared to do the obvious.

These companies do not pay taxes because they extract the money as payments for the use of intellectual property owned by the parent company. This goes to a holding company in Europe (Luxembourg, Switzerland and others) and from there to some South Sea island tax haven.

HMRC would merely have to regard the payment of these licensing fees as an extraction of profits (which in reality is exactly what they are!) and all that shenanigans would have to stop! I think a foreign CGT rate of 35% would be justifiable.

Maybe it's time the World sneered at companies like Luxembourg and Switzerland rather than putting them on a pedestal and saying how great they are.

It's not really the companies fault for doing this, it is the countries who allow it.

There should be pressure put on countries to have standardized corporation tax rates.

 

[thetiger2015]

Maybe it's time the World sneered at companies like Luxembourg and Switzerland rather than putting them on a pedestal and saying how great they are.

It's not really the companyies fault for doing this, it is the countries who allow it.

There should be pressure put on counties to have standardized corporation tax rates.

But the UK, US and generally global tax systems are designed to extract wealth from the poor and fill the bank accounts of the world's richest people. Hence, they'll never change, because it keeps the poor on the floor and the middle classes paying the highest percentage of tax relevant to earnings, kept in their place basically.

They squeeze until the pips squeak and then moan and whinge when the bubble bursts, only for their friends to create a new bubble for them to benefit from. They should of let the whole thing collapse in 2008, a big financial reset but we watched as the wealthiest screamed and tub thumped until someone created a temporary fix, which has now become a permanent fix (causing more problems than it solved).

I'm not talking about millionaires, who got lucky selling pink taps on eBay, I'm talking about the people with absurd wealth, more than they can spend, more than they'll ever need!

 

[Newchodge]

Maybe it's time the World sneered at companies like Luxembourg and Switzerland rather than putting them on a pedestal and saying how great they are.

It's not really the companies fault for doing this, it is the countries who allow it.

There should be pressure put on countries to have standardized corporation tax rates.

While I agree with the principle it is a bit hard for Britain to sneer given all the tax havens we facilitate! Isle of Man, Channel Islands, British Virgin Islands, Cayman Islands, Have a look here https://cthi.taxjustice.net/

 

[UKSBD]

While I agree with the principle it is a bit hard for Britain to sneer given all the tax havens we facilitate! Isle of Man, Channel Islands, British Virgin Islands, Cayman Islands, Have a look here https://cthi.taxjustice.net/

Thats why I said "it's time the World sneered"