Businesses confused by the current UK tax system

News Article - 25 February 2011
Category: Business

As many as two-thirds of the nation's companies are struggling to understand the UK tax system, a BDO survey reveals.

The current laws have left many businesses confused as to where the line is drawn between legitimate tax planning and tax evasion. The review showed that 65 per cent of businesses find dealing with HMRC more arduous than five years ago.

Almost nine in 10 surveyed business leaders suggested that dealing with HMRC would be extremely easier if the Government were to simplify tax rules.

There has been a long-standing view from many businesses that the current intricate tax framework is exaggerated by a lack of commercial understanding from HMRC advisers. On occasion HMRC has been accused of taking an aggressive stance towards commercial business transactions. As a result, business leaders are calling upon Chancellor George Osborne to use the upcoming March 23^rd Budget to amend the framework for HMRC's approach for identifying the boundaries of acceptable and unacceptable tax planning.

Many businesses admit to feeling "guilty until proven innocent", highlighting the need for a reformed code of conduct allowing for a more selective and discriminative approach to bona fide commercially driven events.

Should the current issues remain unaddressed it is possible that the number of new businesses in the UK will diminish in the medium term, leading to the erosion of the tax base and reducing the potential for cuts to corporation tax and income tax rates.

An HMRC spokesman said: "HMRC recognises there is a difference between tax planning and avoidance. Our approach to protecting tax revenues means supporting those businesses that are open and honest with us by reducing the time they spend with us working on tax issues.

"All large businesses are provided with an HMRC customer relationship manager who will be happy to discuss transactions with them to get a better understanding of the commercial context and provide a view on the tax implications."

Maintaining financial transparency can help firms undertake tax planning effectively whilst remaining fully compliant at all times. Access accounts and ledger software can help, giving businesses full and instant access to all information needed to make informed strategic decisions, for budgeting, cash flow forecasting and asset management.

For more information, please call Access on 0845 345 3300.

Article keywords: UK tax system, BDO, tax planning, tax evasion, HMRC, tax rules, Chancellor George Osborne, Budget, Access accounts and ledger software

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