PwC Survey Questions Effectiveness Of UK Tax Incentives

by Jason Gorringe, Tax-News.com, London

26 July 2006

Many tax reliefs and incentives need to be reassessed if they are to genuinely help stimulate enterprise and encourage businesses to grow, findings from a survey conducted by PricewaterhouseCoopers LLP among UK privately owned businesses indicate.

As part of the survey, the results of which were published this week, interviews were carried out among just over 350 privately owned businesses, with the aim of testing awareness of fiscal incentives and other tax measures and how they were used.

According to PwC, the findings showed:

• Limited awareness, with an average awareness across nine named incentive schemes of 41%;
• Low usage, with an 11% average usage across the nine named schemes; and
• Limited impact, with a large proportion of respondents that did use the incentives reporting that their commercial behaviour was unaffected, suggesting that these incentives may not be a motivation for behavioural change, but a form of reward or concession for what these businesses were doing anyway.

Kevin Nicholson, PwC's UK head of entrepreneurs and private companies, observed that:

“There is wide recognition of a need to reassess the effectiveness of current tax incentives and reliefs for privately owned businesses. We know that Government is keen to work with business towards establishing more effective reliefs and incentives that truly support enterprise."

"This is a signal to the business community and the tax profession to come up with ideas to ensure these incentives are better targeted and specific constructive suggestions for simplification measures.”

The findings indicated that the larger the company, the more aware it is likely to be of the tax reliefs and incentives. They also suggested that information is not reaching many small businesses that could benefit from the incentives and reliefs. Additionally, the process for benefiting from tax incentives and reliefs is seen as too complex in some cases.

With regard to the UK tax system as a whole, three quarters (76%) of respondents believe that it is not supportive in encouraging enterprise in the UK, because of inadequate support and excessive red tape. Only 22% of respondents said that the current tax regime would be supportive as they move to the next stage of development.

The majority of respondents to the study (85%) said that privately owned businesses need a more effective voice within HM Revenue & Customs and HM Treasury.

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