close
Share with your friends

Businesses optimistic on growth but overlook the value of tax reliefs

Businesses optimistic on growth but overlook the value

The majority of SME and Mid-Market businesses surveyed are planning to grow in 2019 but struggle to see the value of tax relief to drive that growth, according to new research from KPMG.

1000

Also on home.kpmg

  • Majority of SME and Mid-Market businesses planning growth for 2019 but only a quarter of businesses see tax as a key driver
  • Positive awareness of the most effective tax incentives for job creation and investment, but less so for innovation, productivity and regional development 
  • Businesses broadly agree that tax policy is on the right lines to encourage growth but complexity remains a concern
  • Growth expectations play a key role as faster growing businesses say they make more use of tax incentives compared to moderate growth companies

Despite wider economic uncertainty, the majority of SME and Mid-Market businesses surveyed are planning to grow in 2019 but struggle to see the value of tax relief to drive that growth, according to new research from KPMG.

While 94% of businesses are predicting to grow at least 5% for the year ahead, less than a quarter (24%) of businesses see the tax system as a key driver, highlighting the need for more understanding of the tax reliefs and incentives on offer.

KPMG’s second annual Backing Business Growth survey spoke to 1,000 small to medium-sized enterprises (SMEs) and Mid-Market businesses across the UK with an annual turnover of at least £10m – 82% of which are privately-owned – to explore their attitudes to the tax system and whether it is providing the most effective incentives and support for their growth ambitions.

Businesses understand importance of tax but don’t make full use of reliefs on offer

The majority (87%) of respondents said that tax was important to at least some extent in making business decisions but only around a quarter (27%) said that they were making full use of the tax reliefs and incentives on offer.

Businesses were clear in identifying the policies they felt were the greatest drivers of job creation and investment (such as additional tax relief for employee training and the Enterprise Investment Scheme) but were less clear on linking tax initiatives to specific outcomes that drive innovation, creativity and productivity.

Mike Linter, Partner and Head of National Markets Tax said: “Understanding how well the tax system is working for SME and Mid-Market businesses - the engine-room of the UK economy - could not be more important, especially as we move towards a post-Brexit economy.

“It’s positive to see that these businesses are planning to grow and this underlines their ambition. However our research shows that there are significant gaps where businesses struggle to use the tax system to help them reach their goals and find it difficult to link tax initiatives to specific outcomes.”

Calls for tax system simplification

Almost two-thirds of businesses feel that current tax policy is broadly on the right lines to encourage growth. However a similar number (63%) said that simplifying the tax system should be the priority of the government and felt (62%) that the tax system is too complex.

Contrast between fast growth and moderate growth businesses

While overall, the majority of those surveyed do not think tax is a ‘driver for growth’, segmenting businesses by growth expectation revealed differing attitudes between companies expecting fast or moderate growth.
Among higher growth businesses, 78% think the tax system supports growth compared to just 18% within the moderate growth segment.
Similarly compared with 27% of businesses that say they are making maximum use of the tax system, this rises to 75% within the fastest growing segment, suggesting that growth businesses are more engaged with the tax system. The report found further differences when looking at the size of firm, its location and the sector that it operates in.

Mike Linter concluded: “The data shows that businesses consistently feel that there is too much complexity in the system – the right incentives are there but making the most of them is not always straightforward for SME and Mid-Market businesses, which are often resource-constrained.

“Furthermore a businesses’ level of engagement can depend on a number of factors such as their growth aspirations, size of company, location and the sector that they operate in.

“One possible way forward could be to provide more explanation of the intentions behind policies which might help to raise awareness amongst these businesses. Equally businesses need to view tax as a valuable lever to grow or invest and consider it upfront as part of their decision making process rather than retro-fitting it during the tax return cycle. Only through better engagement and understanding will we be able to drive growth from the tax system through to business.”

Regional differences

Businesses were split on how policy could best drive local activity. Almost a third (31%) of fast growth companies want City Mayors to be able to flex business rates, but only 5% of moderate growth companies agree. Targeted regional relief gains some support in Scotland (23%) and helping attract international investment in the South West (23%). Enterprise zones are the most popular in the North West and East and West Midlands (17%).


NOTES TO EDITORS

  • For media queries please contact Ed Fotheringham Smith, PR Manager, 07920 572490 or Edward.FotheringhamSmith@KPMG.co.uk
  • You can find a copy of the report available on Monday 11 March from https://home.kpmg/uk/en/home/insights/2019/03/backing-business-growth-study---2nd-edition.html
  • The survey was completed by 1,000 businesses in December 2018 and January 2019: 
    • Turnover
      • £10m - £49m annual turnover – 25%
      • £50m - £99m annual turnover – 25%
      • £100m - £199m annual turnover – 25%
      • £200m - £299m annual turnover – 15%
      • £300m - £750m annual turnover – 10%
    • Sector
      • Retail – 23%
      • Technology, media and telecommunications – 23%
      • Business and professional services – 22%
      • Industrial (engineering and manufacturing) – 20%
      • Pharmaceutical – 12%
  • Regional splits are also available

 

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 16,300 partners and staff.  The UK firm recorded a revenue of £2.338 billion in the year ended 30 September 2018. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal