The Professional Contractors Group has warned small business taxation is getting close to ‘dangerous territory’ and taxpayers’ willingness to comply with their legal tax obligations would weaken as anger against the present tax system increased.

The group blames HM Revenue & Customs’ rhetoric over avoidance in part for a ‘breakdown in relations between the tax authority and small business in recent years’.

PCG has called for an overhaul of the tax regime, criticising its complexity, uncertainty and ‘sometimes strange and inconsistent tax outcomes’, particularly the retroactive impact of the latest changes or proposals such as the simplification of capital gains tax (CGT) and rules designed to stop ‘income shifting’ in family-run businesses, the Financial Times reports.

PCG, which has 16,500 members, was formed in 1999 to lobby against a tax change affecting freelancers and it backed the husband-and-wife team behind Arctic Systems, who won a legal battle last year against the government over income shifting.

Further reading:

Fair family business tax is 'mission impossible'

Budget reaction: Income shifting warning despite delay

Read the Financial Times story