Small businesses are the backbone of the UK economy, but they also face a number of challenges, including the high cost of taxation. One of the biggest challenges for small businesses is having to pay both VAT and corporation tax.
VAT is a tax on goods and services that is charged at the point of sale. The standard rate of VAT in the UK is 20%. Corporation tax is a tax on the profits of businesses. The main rate of corporation tax in the UK is 25%.
The argument that it is not fair for small businesses to have to pay both VAT and corporation tax is based on the following points:
Small businesses are often struggling to make ends meet, and the additional tax burden can make it difficult for them to survive.
VAT is a regressive tax, which means that it takes a larger proportion of the income of low-income earners than high-income earners. This is because low-income earners spend a higher proportion of their income on goods and services that are subject to VAT.
Corporation tax is a tax on profits, but small businesses often do not make a profit, or their profits are very small. This means that they are effectively paying tax on their losses.
There are a number of arguments in favour of small businesses having to pay both VAT and corporation tax. These include:
VAT is a fair tax because it is applied to all businesses, regardless of size.
Corporation tax is a necessary way to raise revenue for the government.
Small businesses can benefit from a number of tax reliefs and allowances, which can help to offset the cost of paying VAT and corporation tax.
Ultimately, the question of whether it is fair for small businesses to have to pay both VAT and corporation tax is a complex one. There are valid arguments on both sides of the debate. However, it is clear that the high cost of taxation can be a significant challenge for small businesses.
In recent years, the UK government has introduced a number of measures to help small businesses, such as reducing the rate of corporation tax for small businesses and increasing the level of tax reliefs and allowances available. However, there is still more that could be done to make it easier for small businesses to thrive.