HMRC accused of blocking business tax incentives

Business group complains HMRC is too slow to respond to enquiries and is hurting entrepreneurs.

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Written and reviewed by:
Helena Young

Challenges with accessing support from HMRC pose hurdles for growing businesses. That’s according to entrepreneur Sahar Hashemi, who says the service’s slow response time has left many companies struggling to access important tax breaks.

In comments published by the BBC, Hashemi, who leads the female-focused network Buy Women Built, said entrepreneurs were “missing out on key government incentives aimed at boosting new businesses and innovation”.

HMRC's helpdesk has faced persistent criticism for its complexity and lack of clarity. As a result, our own recent business survey identified tax as the most difficult topic for entrepreneurs to source accurate information on.

Tax claims confused by HMRC delays

Describing the process of contacting HMRC as “very difficult,” Hashemi singled out two tax relief schemes: Research and Development (R&D) and the Enterprise Investment Scheme (EIS), both of which allow company owners to claim a tax relief on company investments.

Each year, HMRC receives 1.1 million claims for tax relief from employees on their expenses. Currently, businesses that have made a claim for repayment must wait for HMRC to verify it by opening a compliance check or ‘enquiry'.

For cash-poor startups, delays to the approval process can be critical. Early-stage firms tend to have smaller cash reserves to fall back on between the time a purchase is made and the claim is approved – especially in today’s economy.

Gender gap

Hashemi particularly highlighted the plight of women founders. Currently, the group receives only 2% of venture capital in the UK, with many owners having to rely on niche business grants for women to fund their growth.

Startups’ research on the gender funding gap revealed that male founders received 6.2x more early-stage investment than female last year.

Now Hashemi, who co-founded High Street chain Coffee Republic, called for an “urgent review to take place on the rules around funding, to ensure that all HMRC staff are aware of the legitimacy of these claims.”

Taxing times for SMEs

Successive governments have promised to reduce business red tape when it comes to tax claims. Today’s SMEs are bogged down by information, making it difficult for them to focus on core business activities.

In a survey of 564 businesses, conducted by Startups.co.uk, 15% said tax is the most difficult topic to access information on.

The government last week announced a new, online service aimed at employees. It said the service, due to go live this year, would simplify tax relief claims on expenses in one place.

Entrepreneurs have a right to feel sceptical towards these pledges. Last month, the Public Accounts Committee (PAC) warned that businesses were footing the bill for Making Tax Digital (MTD), another program aimed at making it easier for people to get their tax right.

According to the PAC, business taxpayers would have to pay more than £1.9bn to comply with new arrangements over the first five years.

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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