Tax burdens 'hitting recruitment'

First published in National News © by

Tax burdens on business increase as firms grow, hitting any plans they have to recruit more workers, according to a new report.

The Institute of Directors (IoD) said the UK's smallest companies paid more than 30% of their profits in tax, rising to 40% for larger firms, when national insurance, business rates and road fuel duties were added to corporation tax.

Profits from the first four or five months of the year are taken up in taxes, said the IoD report. A micro firm with five employees would typically pay 117 days' worth of profit in tax in 2012, but if it expanded to 20 staff this figure rises to 140 days, and to 152 days for a workforce of 100.

Richard Baron, head of taxation at the IoD, said: "It may be easy to think that bigger businesses have broader shoulders, but it's important to remember that they only got to that size because someone took a chance on their idea. It is always risky to start, or to expand, a business.

"Entrepreneurs and investors will not put their money on the line if the return after tax is too small. At a time when there are already so many economic risks and unemployment is so stubbornly high, we cannot afford to make it so difficult for businesses to invest and grow."

The IoD report, Tax - the Weighty Burden, said the overall tax burden on businesses was a lot higher than the corporation tax rates of 20% and 24%.

"This has serious implications for the economy. It is risky to start, or to expand, a business. Entrepreneurs will not put their own capital at risk, and other providers of capital will hold back, if the potential rewards are too greatly reduced by taxation.

"A business can expect to have to pay four or five months' worth of profits to the state each year. The position has improved slightly since last year, but there is still a long way to go to create a truly business-friendly tax environment."

Comments (1)

Please log in to enable comment sorting

10:12am Wed 20 Jun 12

newscritic says...

Well someonme has to pay for the Olympics, Jubilee and MPs gold plated pensions.
Well someonme has to pay for the Olympics, Jubilee and MPs gold plated pensions. newscritic
  • Score: 0
Post a comment

Remember you are personally responsible for what you post on this site and must abide by our site terms. Do not post anything that is false, abusive or malicious. If you wish to complain, please use the ‘report this post’ link.

Send us your news, pictures and videos

Most read stories

Local Info

Enter your postcode, town or place name

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree