CBI seeks tax changes to boost medium-sized firms
MORE help is needed to support medium-sized business grow, export and thrive, a report said today.
CBI, the business group, and accountants Grant Thornton, say tax changes are need to help companies with a turnover of between £10m to £100m. Such firms represent less than 2% of businesses but generate 23% of economic revenue and 16% of all jobs.
The ‘Stuck in the middle’ report shows that the tax system is acting as a brake on growth. It claims it is disrupting their cash flow, absorbing management time and dampening export ambitions.
It says MSBs do not have the resources that large companies have to navigate tax rules, nor do they receive the targeted support that the government directs at small firms.
To remedy this situation the CBI and GT are calling for a number of changes to the tax system, including widening access to R&D tax relief.
John Cridland, CBI director-general, said: “We need our growing businesses to invest, innovate and break into new markets to secure the long-term health of our economy. The UK’s tax system should support these entrepreneurs to do this but in many cases it is actually working against them.
“Medium-sized firms are not able to benefit from the incentives that small firms do and at the same time most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.
“The Government must urgently review rules around R&D investment, international tax requirements and take steps to stop medium-sized firms from being treated like large companies when it comes to corporate tax payment.”
The report calls for the Government to:
:: Raise the threshold for the Quarterly Instalment Payments system from £1.5m to £5m. Under the current tax system, when a business’ annual taxable profits reach £1.5m it has to pay tax up front on a quarterly basis instead of annually. Many MSBs are caught by these rules even though they don’t have the cash reserves to manage them, diverting their finances away from investment.
::Change the SME R&D tax relief to allow all growing businesses to benefit as long as they do not have a controlling investment stake from a larger company. Under the current tax rules if a business is more than 25% owned by another company, despite not being a controlling stake, they do not qualify for the SME R&D relief so the Government should raise this level to 50%.
:: Raise the threshold for exemption from transfer pricing rules from firms with less than 250 employees to firms with up to 500 employees. We should be encouraging MSBs to break into new markets to export their goods and services abroad but as businesses become more established in overseas jurisdictions, the tax burden increases, particularly transfer pricing requirements.
