One in five businesses consider relocation over punishing tax regime

Kashflow logo
Gina Dyer
Deputy Editor
Sift Media
Share this content

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."



Please login or register to join the discussion.

25th Aug 2010 19:23

Not just the age-old problem of Corporation Tax rates

I'm not sure if I am alone in this, but it is no longer just a case of businesses complaining about the absolute or marginal corporation tax rates. This has been the refrain of business since Adam was a lad - Adam Smith of course.

The main difficulty that businesses (of any size) face with HMRC is uncertainty. The tax code has become cumbersome and rife with contradictions and holes. These CAN work for businesses, but mostly they work AGAINST businesses. To highlight a particular gripe would be the 'Anti-avoidance' clauses that are tagged onto every specific section. There is also the uncertainty caused by continual changes being made across the board and across the spectrum of taxes. Under the chancellorship of Gordon Brown this went from the sublime to the ridiculous, with major changes being delivered with every budget.

I appreciate the difficulties of the current coalition government. They have been left with a massive deficit to control while having tax revenues that can be described as at best 'worrying' (and at worst 'frightening'). What is needed at the present time is a massive simplification of the tax code, however the possibility of such simplification leading to lower government revenues is not something they can deal with at the present time.

The best the government can do is to eliminate various taxes which are high in beauracracy, but low in revenue, in the hope that this will convince some of those businesses that are 'putting on their hat and coat' (HSBC et al) to wait to see what happens. This might preserve the existing tax revenues if nothing else.

The biggest uncertainty to my mind is the erratic, over-zealous and deliberately harmful attitude of the current generation of Tax Inspectors. The merger with HM Customs seems to have infected the 'Revenue' side of the organization with the attitude that those 'customers' that aren't evading are thinking about it. This ABSOLUTELY HAS TO STOP.

The majority of business in the UK are interested in doing whatever it is that increases sales. They pay taxes, but provided such taxes are reasonable and predictable, it's just a matter of ensuring there is sufficient cash retained in the business to pay the tax.

The problem comes when an Inspector of Taxes turns up on the premises with his new 'Customs' powers on a fishing trip. This can (and often does) bring the whole business grinding to a halt. Even if (after a thorough investigation) the business is given a clean bill of health the damage has already been done as the disruption has a far bigger impact on the business than the tax assessment in most cases.

We need to get back to a situation where investigations are done proportionately, however given the relative inexperience of most of the current generation of Inspectors (except in the techniques of interogation and tax revenue maximization), I fear this is nothing more than a pipe dream or a rose tinted view of how the Inland Revenue used to operate prior to 1996 and the introduction of self assessment.

Regardless of anything else businesses CANNOT TRUST HMRC because of the massive and continual incompetence at seemingly every level, from the inability to answer telephones; read (never mind respond to) letters from both agents and taxpayers, etc - the list is endless.

If the coalition government wants private sector business to lead the recovery then they need to be able to do their job without fear or interference from HMRC. Equally, HMRC needs to get back to the job of collecting tax revenues from those who should be paying but aren't rather than unneccesarily impeading genuine businesses.

Thanks (0)
26th Aug 2010 09:22

yet another non-story

If you ask them would they consider relocating because of tax, they say yes. So you create a story.

Thanks (0)
26th Aug 2010 15:20

and that's the question asked by HMRC in this survey last year

Thanks (0)