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back to article Small firms say UK taxes are strangling growth

The Federation of Small Business has found that its members would happily take on more staff if they weren't groaning under the financial burden of keeping the British government ticking over. The organisation also predicted a rise in unemployment, giving its members even more reason to rail against the taxes they will have to …

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WTF?

Small earthquake in Chile

Has there ever been a time when UK small firms *weren't* complaining about taxes?

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FAIL

How much Tax!?

I run a small IT company. Just to put your comment into context. for every £1 I put into my own pocket, I pay £7 to the Tax man or costs incurred due to tax/government complience.

As well as the standard taxes; VAT/Corporation Tax, PAYE, NI, bookkeeper fees, accountant fees, company house fees, health and safey costs etc etc.... there are all the hidden costs, try and phone your tax office to ask a question? Well best to plan a morning to get that done as you'll get passed from pillar to post before you get to speak to someone.. then they'll tell you to write a letter to them and they'll reply in non-understandable terms within the nexst few weeks.

Just the cost of Health and Safety complience and NI costs would allow us to employ one more person!

My guess, by your flippant comment, you have the luxury of being employed, maybe you should try and start your own company and I think you'd get an eye-opener.

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FAIL

Ah, yes, those pesky health and safety regulations

"Just the cost of Health and Safety complience and NI costs would allow us to employ one more person!"

Of course, there are shining examples throughout the world of how to avoid such burdensome red tape. Why not open a mine in China?

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Alternatively known as...

PAYE,ie your employees' income tax, VAT, Corporation tax, NI, accountant/book-keepers' fees, are a cost of doing business. If you can't figure that into your business plan, or your electricity bill, or rent, or insurance, or equipment/software purchasing, do you have the nous to be in be=usines in the first place?

Alambritis and his acolytes at the FSB (he's not mentioned in the article - retired?) have been banging on about this for decades. And he's been wrong every time, since the FSB is just an arm arm of the Tory party, and always has been.

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Happy

Exponential tax on oh my

You are paying 7 quid on every quid and I suppose the same is true of the small firm who sold me 5 pieces of wood yesterday at 89p apiece for £5.22 was also on that rate?

Someone is as rich as a pig in shit somewhere. Investment banker or someone? Northern Rockette?

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FAIL

How much are the bosses paying themselves?

Survey that!

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Anonymous Coward

Well

they are probably paying themselves very little.

As a member of the FSB (motto: "we whine for British Biz") I pay myself a very small remittance for the actual job I do for my company. I also pay my wife very little for being the company secretary, even though she has a new car every other year. My daughter is the office secretary, and gets a minor wage...plus another car...Oh, and I'm also a director (along with my wife) but that is self employed so it doesn't count.

I prefer not to mention the company pension...since various govs made it difficult for the company to pay it for me. I had to consult with the accountant to work-out how to get around that....and no...I do not intend to pay the smurfs a pension (workforce)...I had to consult with a pension company when that stake(steak)holders thing came out....offered it to the smurfs but none took it up...they should have enough to pay into it...I pay them £6.17/hour...but no...

It's not as if I'm getting rich...even though I sell the scrap for cash to the local dids...(I only get a few thousand a year from it so it don't really count).

All this safety gear costs me a fortune...but I had a wage-rise-free year last year to pay for it.

The FSB are worth their weight...not in gold, but shit.

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Silver badge

Partly true.

But taxes on small business aren't really that bad. Tax revenue from the private sector has fallen and fallen. But government expenditure hasn't fallen in pace with it. Instead, the shortfall is made up by borrowing (both on the books and more sneaky ways). increasing taxation on people (income tax, NI, council tax, etc.) and to a lesser extent, small businesses. The reason for the shortfall? There are fewer small businesses nowadays and the big boys have now discovered they can use the global economy to threaten national governments. Cost us too much and we'll offshore our manufacturing or move our HQ and bank accounts abroad. Newscorp has a revenue in the billions and pays taxes in the thousands. This is the hidden issue that neither Conservatives nor Labour are willing to even raise. They just pretend money is tight for no reason and find new ways to squeeze it out of the public and those smaller business that can't move. And the smaller businesses are getting rarer and rarer. Those local shops? They're all chains now. Where once profits would return to the local community, they get sucked straight down to London or abroad. The country is being bled dry. Small businesses aren't too badly off compared to the general public. But it's the big companies that are responsible.

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FAIL

Taxes or Recession?

Taxes, inflation, increasing cost of services and petrol etc, weak GBP, banks unwilliness to create positive agreements (unless they get the benefit), etc.

We are just in the early stages of ‘recovery’ at the moment, and eventually we will get to what was the pre boom norm of 6 or 7 years ago – a natural point of economic stability. Those companies which were formed, over the last 5 years, with a boom business plan will have great difficulties unless they restructure.

I can’t see many of the newer start-ups taking on additional staff in the short term. Better to use contractors who should be undercutting rivals at the moment – I remember I did during the last recession and, after setting up my own business, taking on the cheapest competent contractors I could find (checked them out myself rather than useing agencies – usually level headed grads and hobbyists) - cheap and desperate!

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Stop

Evil greedy government!!

No! The general public should be taxed instead, that way they'd have less money to spend on your goods and services, errr.. hang on..

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Silver badge
FAIL

Who are you kidding?

The general public pays it anyway. It isn't like the costs don't get passed on to the buyer leaving them with "less money to spend" which is one reason why demand goes down when prices go up. Look up "deadweight loss" as it pertains to economics and you'll see that taxes mean less for business and less for the consumer. The only "winner" is government.

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never learn?

So Europe hobbled its economy by having minimum wages and high social taxes on jobs resulting in massive unemployment, especially amongst the young.

could never happen here..... oh, we have 25% youth unemployment you say. oh dear.

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Social taxes

Of course you're right, high social taxes will keep people in jobs, like they do in Spain.

could never happen there..... oh, they have 19.5% OVERALL unemployment you say. oh dear.

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Bureaucracy

When they say that they are taking on more staff, presumably this is to cope with all the HR / Security / Health & Safety regulations that the EU and Government believes are absolutely critical to impose during a recession. I work for a small business and the amount of time we are spend on this stuff is just laughable. Its a wonder any small businesses survive at all.

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More likely...

...your risk management is up the swannee.

Take a look at http://www.hse.gov.uk/myth/ most H&S risks as reported by the Daily Heil aren't a cost to business at all.

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FAIL

Jon G:

So what you're saying is, the rights of employees to a safe and secure work environment should apply only when their employers are coining it in anyway and feeling generous?

Ah, we've come such a long way since the Victorian age.

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WTF?

Re: Taxes or Recession?

@ iMlite said "Better to use contractors who should be undercutting rivals at the moment – I remember I did during the last recession and, after setting up my own business, taking on the cheapest competent contractors I could find ..." " - cheap and desperate!

Are you serious? Because if you are this is exactly what's wrong with the IT "profession" at the moment, and shows the workers vs management disconnect (dare I say mutual contempt) is alive and kicking. Didn't it occur to you to not take advantage of these "cheap and desperate" contractors and rather build a mutual beneficial long term business relationship, you provided a decent hourly rate, and the contractors provided high quality code, which could be trusted to work. Perhaps then the contractors might be willing to go back and do further work. It would have served you right if the moment the "cheap and desperate" contractors got a better rate they upped sticks and left you up sh*t creek.

As a contractor I have more than once shovelled up after "cheap" contractors brought in to do a job cheaply (who were discovered to be not up to the job). Usually the company's bad attitude has shone through, and after the contract has finished, with the company desperate to renew, I've told them where to stick their extension. It cuts both ways.

As a contractor trying to earn a living I'm totally fed-up with managers "getting off on" treating people like sh*t. No way to run a country and proves most managers are w*nkers.

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Anonymous Coward

Not w*nkers

the last one I had spent his time trying to get into the workers wives knickers...he was always going to their houses asking if the guy was home.

When he wasn't speeding in his lotus...and getting clobbered for it....

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Thumb Down

2nd year as a non tax payer...

not by choice, but thats all I can afford to pay myself. I work on 47.5% of everything I make is taxed, whats left pays bills.

Then the gov wonders why there's such high unemployment. Losing the 10% tax break made a difference.

The irony is I could be a binman and earn double the salary for less hours and less stress.

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FAIL

I don't believe you...

Do you buy anything?

If yes, you are a taxpayer.

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Grenade

The BIG question.

Of course the big question is what the fuck are they doing with all our money?

Or put another way... What have the Romans ever done for us?

Apart from...

The CCTV.

The endless new crimes.

The perpetual attacks on personal transport.

The monitoring and databasing of all of our personal information.

The dumbing down of our schoolchildren so that they won't have too high expectations.

The protection that they are "giving" us when we want to use an aeroplane (aka the war on terrorism).

The pursuit of illegal wars in support of some weird concept they call "democracy".

The endless pursuit of people who want to be free to stick something into their bodies that make them feel different.

The provision of a national ill-health scheme and its subsequent rationing and threats to anyone that doesn't behave according to current dictum.

The re-jigging of our energy provision which will ensure that within ten years, most people won't be able to afford heat, light or fuel for transport.

The pursuit of the Malthusian concept that if we don't increase taxes to 100% we will all burn in hell as a result of climate change.

Boy! Did I get out of bed on the wrong side this morning!

However, my point is valid, what exactly is the point of government which is effectively out of control, like ours?

The further point of course is how the fuck do we get them under control?

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Megaphone

Couldn't agree more

The problem is not the amount the business has to pay in tax (20% small business corporation tax is not unreasonable, VAT is paid by the customer in the end and NI is manageable or zero depending on how you remunerate people). The problem is the amount of time and effort it takes to pay it and the barrier that makes to growing from a few directors to anything bigger. The chap saying he pays £7 in tax administration per £1 profit is probably about probably right once you include opportunity cost, lawyers and accountants.

A couple of examples:

1. Corporation tax:

Excluding day to day record keeping, it took two directors and an accountant 2 weeks to finalise our company accounts last year. That was just going from accurate up to date electronic accounts in 2008 format to the same thing in a format acceptable to the HMRC in 2009.

Cost:

10 days x (£500 per day + £800 per day + 8 x £200 per hour) = £29,000

1 new starter I won't be employing.

2. IR35

It took a director and a lawyer to check all our new contracts for IR35 compliance and negotiate any changes required with the customers. Roughly a day of the directors time for each customer (excluding travel expenses) and an average of 3 hours of a contract lawyer.

Cost: 10 new clients x ( 1 x £800 per day + 3 x £200 per hour) = £14,000

Another half a new starter I won't be employing.

I have plenty of profitable work for an extra member of staff and would love to stop working weekends but I'm unwilling to do so because I would also have to pay for extra accountancy, lawyering and a clerical assistant (all of whom are pure cost) to handle the tax and other admin involved. I haven't included time for training and mentoring on the downside as I secretly quite enjoy that bit. However, I would have to spend a bunch of my time sorting out H&S policies, employment contracts, pensions et al. At a point when the directors are the main contributors to the company profits that is problematic.

But the biggest factor by far is that I do IT because I enjoy creating systems and getting a team of very bright people to build something we are proud of and that does what the customer wanted. I don't do it because I enjoy paperwork.

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Linux

Too much junk and too much 'back pocket'

There are some taxes which can't be avoided, i.e., you pay someone and become liable to pay their income tax and their NI, then on top you have to pay employers NI (payroll tax) for every employee. The value of the job provided is the TOTAL of those payments, which is why the employe often thinks they are getting a bit less than they deserve.

When you observe what was done out of sight of H&S, then it is no surprise to see new rules being applied regularly. One thing which brought all this about is the demise of apprenticeships in UK industry. If you have the right man with the right training and attitude doing the job, then he has a natural sense of safety built in. However, to save loads of money, companies started to use 'unskilled' labour to run machinery. The net result was an increase in accidents, largely due to lack of attention by the worker to the job in hand! Blame both employer AND the unskilled worker for allowing this to come about.

I have run my own company for more than thirty years and we get through recessions just like we get through the better times. Concentrate on the job in hand. Do it to your best capability and make sure that it is delivered on time. Of course, I trample on what some might call 'workers rights'. For instance, I don't allow newspaper in the working areas. Read them in tea breaks, but not on 'my time'. Of course you can take/make a personal call (if it seems important), but that doesn't include chatting to your friends. Of course you can have time off to bury your mother, but, hey, this is the third mother you've buried!! Not on my time !!

I do my best to run an honest and decent company. The spread of income from the top (me) to the bottom is a factor of three. I get three times as much as the guy at the bottom. BUT, it was my savings which started the company, my house which was used to secure the loans from the bank and I signed all the guarantees, and came up with the business ideas. The next guy down from me gets ten percent less than I do. I hope that my company is run fairly. The prices we charge are based on proper costings which INCLUDE all those factors which the FBS seem to think are so iniquitous, but are simply some of the costs of running a company.

Of course, if your business is so poor that you struggle to get customers through the door, then you are going to bleat about it being everyones' fault except yours ! The solution is to improve what you do to make it more desirable. One last comment from my own observations of many who could well be members of the SBF, taking cash without receipt suggests that you pocket some without paying tax on it. That drives up tax for everyone!

Get your business model right, get your costings right, get your prices right BASED on your costings, employ the right people with the right work ethic and you will not have to worry too much about the government asking for its share. If you don't know how to run a business then get some education BEFORE YOU START IT !!!

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Thumb Up

I agree with the Anonymous Coward!

I spend my life working with ambitious owner managers helping them create the future they want for their business and for them. In my view, they are the unsung heroes of the economy and indeed of society - they build businesses, create jobs, which in turn enable families to live and give the people who do those jobs a sense of purpose and self-worth, and ultimately, they drive the UK economy. It's only by people taking control of their own destiny and making things happen that anything ever changes. So, it will be ambitious owner managers who lead us to recovery and it will be ambitious owner managers who create and build the businesses which make Britain great again.

Having said that, I personally do not feel that ambitious owner managers are well-served by the FSB who constantly appear to "whine for British biz" as another contributor so eloquently put it.

This latest FSB survey tells us little that isn't pretty apparent. While owner managers are remarkable people and achieve extraordinary things, if you ask an owner manager whether he/she feels that they pay too much tax, then they are going to answer that in exactly the same way as most other people. They'd rather pay less!

At the same time, outside the realms of the FSB, those with the inventiveness and vision, the strength and the courage, the gritty determination and fierce resolve, will simply get on with running good businesses. And, as Anonymous Coward says, if you've got a good business with good people and some distinctive benefits that customers are prepared to pay for, then you won't have to worry too much about taxes. And, if you have to worry so much about the taxman and the government, then there may well be some fundamental problems with the business. In which case, you might need some help .... and that's what we do!

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Anonymous Coward

My heart bleeds

I work for a small business (25 staff) - the two bosses had siphoned off most of the profits towards their (imminent) pension fund by buying an 'investment property' with it and then making the company pay rent to it to use as a warehouse.

When the downturn hit, they were left with not enough cash, so are slowly going bust despite having sacked 1/3 of the staff (and reduced any staff freebies - er, like the lunchtime sandwiches people get given to compensate for being expected not to take their lunch break).

Despite taking a large wad home each month (salary plus 'bonus') and living in huge sprawling houses, their wives and kids are still too poor to pay for things like iPhones, cars, petrol etc. - so that all comes out of the company (and the profits we make for them with our labour).

Before I feel sorry for smallbiz in Britain, I'd like to know whether the above is the exception - or the norm...

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