Monday, June 23, 2014
1:54 PM

An overly complicated tax system is curtailing the growth ambitions of medium-sized business (MSB), according to an industry report.

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Cash-flow, management time and export potential are all suffering because MSBs cannot afford tax planning measures and do not qualify for small business support from the government, a study has found.

The Confederation of British Industry (CBI) and financial specialists Grant Thornton – who commissioned the research – are now calling for a shake-up of the tax framework to better serve MSBs, which are deemed crucial to delivering a robust economic recovery.

John Cridland, CBI Director-General, said: “Medium-sized businesses have the most potential to drive business growth and job creation. But all too often their resources, management time and ambitions are being sapped by a tax system which disproportionately hits firms of this size.

“We need our growing businesses to invest, innovate and break into new markets to secure the long-term health of our economy. The UK’s tax system should support these entrepreneurs to do this but in many cases it is actually working against them.

“Medium-sized firms are not able to benefit from the incentives that small firms do and at the same time most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.

“The government must urgently review rules around R&D investment, international tax requirements and take steps to stop medium-sized firms from being treated like large companies when it comes to corporate tax payment.”

Jonathan Riley, Grant Thornton UK LLP, national head of tax, added: “As the UK’s economy continues to gather pace as we emerge from the recession, it is vital that all businesses do not face administrative burdens that impede their growth.

“This is especially true for MSBs. These organisations face particular challenges in coping with tax law.

“They are not so large that they can self-resource the skills needed to resolve complex tax legislation, or to have the dedicated support that the HMRC CRM affords; neither are they so small that many of the complexities highlighted in this report are not relevant to them. The MSB community often struggle to find a voice, yet when asked they have a lot to say, with tax complexity regularly cited as a major barrier to their growth.”

“We need this dynamic segment of business to fulfil their potential in order to drive UK growth as a whole, and policy makers are beginning to recognise this, and would do well to take heed of the issues uncovered during our research and our simple proposals that would mitigate these barriers.”

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