Business Taxation Survey 2018: West Midlands Regional Data Pt1

Greater Birmingham Chambers of Commerce

From the 11 to 25 April 2018, the British Chambers of Commerce conducted their 2018 Business Taxation Survey.

The survey focused on four key areas for businesses’, recording their views on: the admin/compliance burdens of business taxes, the impact of corporation tax and business rates, satisfaction of HMRC & awareness/preparation for Making Tax Digital and general business conditions (cash flow, investment and access to finance).

With this in mind, the GBCC has taken a closer look at the West Midlands regional data, summarising the four key areas.

This blog post is the first part of our analysis of the results which will focus on the burden of business taxation and the impact of Corporation Tax and business rates.

Part two which focuses on HMRC, Making Tax Digital and general business conditions, will be released later this week.

Views on admin/compliance burdens of business taxes  

• 66% cited VAT as one of the biggest administration/compliance burdens affecting their business.
• 39% of businesses felt that the overall burden of tax admin/compliance had increased significantly compared to 5 years ago

Two in three (66%) businesses in the West Midlands cited VAT as one of the biggest administration and compliance burden’s on their business.  The next most popular answer was ‘PAYE/National insurance contributions’ with just over half (53%) of respondents selecting it, followed by corporation tax (38%) and personal income tax (34%). Only one in ten felt that the Dividend Tax was the biggest burden, in comparison to 6% who selected the Apprenticeship Levy and 2% who cited Capital Gains Tax.        

The majority of businesses’ felt that the overall burden of tax admin and compliance had increased to some extent compared to five years ago, with nearly 2 in 5 (39%) claiming it had significantly increased and 37% selecting slightly increased.  As little as 4% of businesses felt that the overall burden had decreased to some extent with 3% choosing slightly decreased and 1% significantly decreased.  Less than one in five (15%) felt that the overall burden of tax admin and compliance remained the same as it had five years ago.   

As set out in the GBCC manifesto, we will continue to engage with key local and national stakeholders on this issue and call on the Government to modernise and simplify the UK’s unduly complicated tax administration system.

Impact of Corporation Tax and business rates

• 28% of businesses’ have taken lower margins due to business rates.
• 19% have had to reduce or cancel investment as a result of Corporation Tax
• 38% of businesses’ would increase investment in plants and machinery if these assets were excluded from business rates.

More than one in four (28%) West Midland’s businesses claim that in the last year they have had to take lower margins as a result of business rates. Nearly one in five (17%) have been forced to increase the price of their products/services and 11% have reduced or cancelled investment and recruitment plans respectively. As little as 5% have downsized or relocated their office/premises and only 4% had been forced in to making redundancies. The majority of those surveyed (53%) stated that they hadn’t made any of the above changes in response to business rates.

When asked the same question in regards to Corporation Tax, a quarter of businesses had taken lower margins, 19% had reduced or cancelled investment(s), 13% had increased the price of products/services  and 12% had reduced or cancelled recruitment plans. Only 3% had made staff redundancies with 1% downsizing or relocating their office/premises.  A significant number of businesses’ (43%) have not made any of the above changes in the last year as a result of Corporation Tax.

Respondents were then asked what changes, if any, they would make to investment in plant and machinery if these assets were excluded from business rates calculations. Two in five said that they would make no increases, in comparison to 27% who claimed they would make a slight increase in investment and 11% who would significantly increase their investment. Nearly a quarter (22%) of those surveyed did not know if they would increase their investment in response to these assets being excluded from business rate calculations. 

These results throw into sharp relief the impact punitive business rates can have, especially when you consider businesses are already being squeezed as a result of rising rents and a slowdown in consumer spending. It is clear that major reform of the outdated Business Rates system is necessary to incentivise productive investment, encourage companies to hire and enable high street firms to compete on a level playing field with online retailers.