Survey Finds Majority OF SMEs Oppose UK Corporate Tax Plans

by Jason Gorringe, Tax-News.com, London

20 October 2003

A recent survey conducted by accounting firm PKF has shown that a high proportion of the UK's small and medium-sized businesses may not be able to pay their tax bills if the government proceeds with its plans to introduce a tax on unrealised capital gains.

The survey, which polled almost 100 UK firms, found that 78% of respondents were against the proposed changes, which form part of the government's wider review of the British corporate tax system. Additionally, the survey found that many firms fear the complexity of the transitional rules and would be prepared to forgo the benefits the reforms may bring, in order to avoid the increased bureaucracy and red tape. This is particularly so in relation to new transfer pricing rules which will apply to transactions between related UK companies. Currently, the rules only apply to international transactions between related firms.

In contrast, most businesses supported the idea of reform that would pool differing sources of business income in order to simplify tax returns and speed up tax relief for losses, according to the survey.

Commenting on the findings, Peter Penneycard, national director of tax at PKF, observed that: "It's clear that SMEs find the current system of corporation tax complex enough. They are worried that these new proposals will mean considerably more red tape that they simply don't have the time or resources to deal with. The Government needs to think very carefully about how SMEs are going to be affected in their day to day business by any changes to the tax rules. The UK economy relies on SMEs and their needs must be better understood."

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