One in five large UK businesses would consider relocating abroad because of the tax system in this country, according to a study commissioned by HMRC.
TNS-BMRB’s research also showed that 64% of large companies felt that the red tape burden had increased over the past 12 months.
"If only a small fraction of those companies that have considered relocating did relocate abroad it would decimate the UK's tax revenues," Roy Maugham, tax partner at UHY Hacker Young told the Daily Telegraph.
"Whilst the Treasury might feel that deficit reduction means it cannot cut business taxes too quickly there is also a risk to the UK's finances from having a tax system that is uncompetitive compared to places like Ireland. UK companies feel that they are the goose that has been well and truly plucked by HMRC and the Treasury," he added.
According to a study by UHY Hacker Young, 30% of large businesses said the way HMRC administers the tax system had a negative impact on the UK's competitiveness. The number of businesses rating the service provided by HMRC as very good was down from 43% in 2008 to 36% in 2009.
Business owners were also dissatisfied with the way HMRC handles disputes. Just 44% of large businesses thought disagreements with HMRC were resolved within an appropriate period of time, compared to 46% in 2008. The research highlights three specific issues which business taxpayers have long seen as causing disagreements to harden:
- Key technical decisions being made by central HMRC specialists that the taxpayer is never allowed to meet
- Long delays, and lack of communication, while those specialists reach a decision
- HMRC's continued insistence on the taxpayer gathering together every possibly relevant piece of background information before they will even discuss how a disputed transaction might be taxed
"Disputes worth billions of pounds of tax are tied up - sometimes for years - as a result of HMRC's centralised and rigid approach to enquiries. HMRC recently indicated that it may soften its technical approach to settlements where there are varying interpretations of the amount of tax due. HMRC will need to soften its procedures as well if this approach is to work and bring in significant extra tax receipts," commented Rupert Shiers, a partner at law firm McGrigors.
"We acknowledge that even more can be done to help, as we are already working to further our understanding of our customer’s needs, transparency and consistency in our decision making," said an HMRC spokesperson. "Access to information and guidance, especially with regard to online information is also being made easier."
While many businesses expressed dissatisfaction with the tax regime, tax advisers appear mostly content with the coalition government's progress so far. A new survey from LexisNexis found that over half of tax experts rated the government’s performance at 7/10 or above.
"Tax experts have long wanted greater consultation before the introduction of new tax measures, and they are certainly getting that under the coalition. There are currently 48 live consultations on tax - an unprecedented number of consultations, I think - covering everything from aggregates levy to venture capital," said Paul Stainforth, editor of Lexis Nexis Tax Journal.
"The stated approach to business taxation so far seems generally encouraging. The need for greater clarity and simplicity is welcome if overdue. The need to follow through reasonably swiftly whilst taking proper account of representations is urgent. However, politics continues to distort policy on personal taxation and on the taxation and regulation of the financial services sector," said one survey respondent.
"Independent third party surveys have also found that overall, large businesses are happy with the service HMRC provides," said an HMRC spokesperson. "In particular, large business appreciated the efforts HMRC had made to make it more commercially aware and appreciate modern business practice."