How can tax relief benefits help to grow your business?

How can tax relief benefits help to grow your business?

Results from KPMG’s Backing Business Growth Survey have revealed that many businesses are still not capitalising on the benefits available to them

The general perception of tax is that, although expensive, it is a necessary evil when contributing to the UK’s economy.

However, as global uncertainty runs rife, economies are suffering; businesses have tightened their belts and are now approaching their goal of growth with far more trepidation than used to be the norm.

The government has attempted to overcome this increasing trend with the likes of tax relief and other benefits: why are businesses not fully capitalising on this?

“Understanding how well the tax system is working for SME and mid-market businesses – the engine room of the UK economy – could not be more important, especially as we move towards a post-Brexit economy.”

KPMG has released their second annual Backing Business Growth Survey to provide some answers.

The main consensus the Big Four firm has concluded is that the majority of SME and mid-market businesses are still planning for growth in 2019 – in the face of obvious uncertainty – but only a quarter of these businesses see tax as “a key driver” for this.

There is an element of awareness around how the most effective tax incentives will help with job creation and investment, but, for the likes of productivity, regional development, and innovation this is not the case.

“Businesses were clear in identifying the policies they felt were the greatest drivers of job creation and investment (such as additional tax relief for employee training and the Enterprise Investment Scheme) but were less clear on linking tax initiatives to specific outcomes that drive innovation, creativity, and productivity.”

One of the main issues as to why has been identified by KPMG as the complexity factor.

The firm stated: “While 94% of businesses are predicting to grow at least 5% for the year ahead, less than a quarter (24%) of businesses see the tax system as a key driver, highlighting the need for more understanding of tax reliefs and incentives on offer.”

“Understanding how well the tax system is working for SME and mid-market businesses – the engine room of the UK economy – could not be more important, especially as we move towards a post-Brexit economy.”

For their survey, KPMG reached out to and collected data from 1,000 SMEs and mid-market businesses across the country, each with an annual turnover of at least £10m. 82% of these businesses are privately owned.

“It’s positive to see that these businesses are planning to grow, and this underlines their ambition,” said Mike Linter, partner and head of national markets tax at KPMG.

“However, our research shows that there are significant gaps where businesses struggle to use the tax system to help them reach their goals and find it difficult to link tax initiatives to specific outcomes.”

87% of these businesses said that awareness of tax incentives was important to “some extent” when making business decisions. However, only 27% claimed that they were making full use of the various tax benefits on offer.

“The data shows that businesses consistently feel that there is too much complexity in the system—the right incentives are there but making the most of them is not always straightforward for SME and mid-market businesses, which are often resource constrained.”

KPMG reported: “Businesses were clear in identifying the policies they felt were the greatest drivers of job creation and investment (such as additional tax relief for employee training and the Enterprise Investment Scheme) but were less clear on linking tax initiatives to specific outcomes that drive innovation, creativity, and productivity.”

Linter added: “Understanding how well the tax system is working for SME and mid-market businesses – the engine room of the UK economy – could not be more important, especially as we move towards a post-Brexit economy.”

As well as this, there have been calls for a simplification of tax and tax policies. By more cohesively outlining exactly how each incentive could benefit a business focused on growth, it is likely that more UK businesses would go about implementing these into their business plans.

63% of the businesses who took part in KPMG’s survey emphasised that they believed that the simplification of the tax system should be a priority for the government going forward.

“Only through better engagement and understanding will we be able to drive growth from the tax system through to business.”

“The data shows that businesses consistently feel that there is too much complexity in the system—the right incentives are there but making the most of them is not always straightforward for SME and mid-market businesses, which are often resource constrained,” said Linter.

Interestingly, when the firm segmented businesses by their growth expectations, it was revealed that there were differing attitudes to be analysed when comparing fast or moderate growth.

78% of higher growth businesses stated that the current tax system supports growth, whereas only 18% of moderate growth businesses agreed.

“Equally, businesses need to view tax as a valuable lever to grow or invest and consider it upfront as part of their decision-making process, rather than retro-fitting it during the tax return cycle.”

KPMG’s report continued: “Similarly, compared with 27% of businesses that say they are making maximum use of the tax system, this rises to 75% within the fastest growing segment, suggesting that growth businesses are more engaged with the tax system.”

Further distinctions were found when looking at specifics: the size of the firm, the location, and the sector itself.

23% of Scotland-based businesses support targeted regional relief gains, 23% of south west businesses see the value of attempting to attract international investment, and 17% of businesses in the north west, east, and west midlands for enterprise zones.

“One possible way forward could be to provide more explanation of the intentions behind policies which might help to raise awareness amongst these businesses,” mused Linter.

“Equally, businesses need to view tax as a valuable lever to grow or invest and consider it upfront as part of their decision-making process, rather than retro-fitting it during the tax return cycle.”

He concluded: “Only through better engagement and understanding will we be able to drive growth from the tax system through to business.”

Related Articles

Making the most of R&D relief

Tax Making the most of R&D relief

2w Emma Rawson, ATT Technical Officer
What to do if HMRC investigates your SME

Tax What to do if HMRC investigates your SME

2w Dakota Murphey
Should Scotland introduce a tourist tax?

Tax Should Scotland introduce a tourist tax?

2m Emanuela Hawker, Reporter
UK tax advisory market set to grow in 2019

Tax UK tax advisory market set to grow in 2019

2m Emanuela Hawker, Reporter
Tax returns deadline fast approaching

HMRC Tax returns deadline fast approaching

2m Emanuela Hawker, Reporter
Disguised Remuneration Schemes costing 25,500 taxpayers

HMRC Disguised Remuneration Schemes costing 25,500 taxpayers

2m Emanuela Hawker, Reporter
Income tax burden falls on millennials

Tax Income tax burden falls on millennials

2m Emanuela Hawker, Reporter
Firm foundations for a new relief? 

Tax Firm foundations for a new relief? 

3m Emma Rawson, ATT Technical Officer