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In the last five years the tax system has become more complicated, believe two-thirds of UK companies, while half of respondents to the survey are spending increasing amounts of money on tax planning and compliance.

‘Complexity in the tax system absorbs resources, clouds commercial decisions and can make the UK a less attractive investment location,’ asserts Richard Baron, Head of Taxation at the IoD. ‘Along with over-regulation, complicated tax rules are choking the life out of small businesses.

‘There is no doubt our competitive advantage is being eroded by our Byzantine tax system,’ he continues. ‘There is always plenty of space in Finance Bills for new legislation but never much room for sorting out problems with existing rules. But there is a better way. We propose specific improvements, both to policies and to policy-making procedures.’

The IoD recommends the Government follow other countries’ lead and undertake a sweeping reform of the tax system affecting SMEs. Well over half of those polled believed the UK’s competitiveness was being undermined by the current system.

Benefits in kind; employees’ business expenses; national insurance; statutory sick pay and maternity pay; and procedures for employees joining and leaving were identified as areas most in need of improvement.

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