Is HMRC fair? How to navigate the UK tax system as an SME
We’ve said it before, but there are only two guarantees in life: death and taxes. Tax is a necessary evil, but that doesn’t mean the system is perfect. It supplies the country with the money it needs to run. But some feel it isn’t as fair to SMEs as it is to the bigger, multinational companies.
Running a small business is already tricky enough without being weighed down by tax obligations. So, what are some of the ways our tax system can hurt SMEs? And is there a lesson SMEs can learn from this?
Tax is confusing. It’s no wonder 9 out of 10 new businesses feel overwhelmed by tax. There’s no two ways about it. As a small business, you have a lot to deal with, even more so if your business is new. Figuring out what tax to pay, when to pay it, and how much you need to pay is just another thing you don’t want on your plate.
To control this burden, many SMEs go down the route of hiring an accountant to handle their taxes for them. Rather than going through the whole rigmarole of finding the time to do your taxes and understanding them, it’s much more efficient to bring in a third party.
This confusion is detrimental to smaller businesses as it results in them spending money on accountants purely because they don’t understand the system. If their accountants were to make a mistake, the business could then be penalised.
Is HMRC too harsh on SMEs?
SMEs pay more in corporation tax than big businesses. It’s why some people think HMRC treats SMEs too harshly, and that way of thinking has only increased during the pandemic. It’s suggested that corporations typically pay less in tax than SMEs due to them being better at identifying and claiming reliefs compared to SMEs, likely because of their endless resources and their access to much higher funds.
There are several tax reliefs aimed at SMEs that unfortunately go under-claimed. If the HMRC tax system was simpler, or if HMRC were more vocal in informing SMEs about the available tax reliefs, then this likely wouldn’t be the case. Instead, SMEs are forced to pay much more for having much less.
As much as we need a tax system in place, many SMEs feel the current system works against their favour and is too harsh and confusing for most to understand. That doesn’t mean running your business doesn’t have to be an uphill battle. With the right knowledge and accountant by your side, you can still flourish as an SME.
Running a business comes with some challenges – don’t let confusing taxes be one of them. Big Hand are expert accountants, dedicated to helping your business thrive. To find out more about what we can offer you, call us on 0161 327 2911.