Azets Barometer

UK tax regime stifling growth say businesses

R&D tax credits
The R&D tax credit system is in chaos, according to firms

Top businesses say the UK tax regime is stifling economic development by having an adverse affect on business growth, innovation, sustainability, recruitment and retention.

The Azets Barometer, a regular survey of leading SMEs across the UK, Ireland and the Nordics, reveals the scored an average of below 5 (on an optimism scale ranging from zero to 10) with business growth scoring just 4.7.

There is a significant disparity between lower and upper mid-market businesses with those turning over £10m to £49.9m averaging around 5.0, while those with a £50m to £99.9m turnover are slightly more positive with an average score of 6.0.

Compared to the Nordics and Ireland, UK businesses were the least optimistic in the survey.

Mark Pryce, head of business tax with Azets in Scotland said that Scotland’s SMEs are desperate for a business environment where people are incentivised to build business wealth.

“A simplified regime of taxes, regulation and incentives would make a major contribution to entrepreneurship, ambition and investment, he said.

“R&D tax credits, for example, are a key driver of innovation, but the UK scheme is in chaos. And Scotland has now compounded the already too onerous tax muddle with its new six income tax bands.

“The fiscal drag effect means more tax than ever, yet there is an obvious correlation between tax and economic growth, and this ought to be a priority for both governments.”

Full survey results on the interactive dashboard at azets.co.uk/azets-barometer.

Concern about tax dominates much of the debate ahead of next week’s Budget when the Chancellor Jeremy Hunt will be under pressure to ease the cost burden on business.

The Scottish Chambers of Commerce (SCC) is calling on him to:

  • Cut VAT for hospitality, leisure, and tourism sectors to boost spending, stimulate demand and revive our towns and cities.
  • Back the Scotch whisky industry by cutting alcohol duty to ensure the industry is competitive and is supported to grow, export, and create jobs.
  • Commit to maintaining the freeze and 5p cut on fuel duty as consumers continue to feel the pinch from inflation which remains at near record high levels.
  • Help deliver the world’s most pro-enterprise tax regime, by introducing a new, internationally competitive, tax-free shopping incentive for overseas visitors.
  • Support the North Sea industry to recover lost investment and efforts to decarbonise by removing the Energy Profits Levy.

Liz Cameron, chief executive of the Scottish Chambers Commerce, said: “Ahead of the next General Election, this Budget must outline the long-term growth plan businesses sorely need to create jobs and unlock investment.”



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