Large businesses Pay Less In Corporation Tax Than SMEs

While tax rules are supposed to be fair for everyone, there will always be winners and losers in any system no matter how robust.

A recent study by accountancy firm Moore Stephens found that big corporations with a turnover in excess of 1 billion were paying 20% in corporation tax compared to SMEs who pay 21.7%. Rather than the tax system being unfair to SMEs the reason for the disparity is the ability of large corporations employ their considerably resources to reduce their tax liabilities.

The study found that big corporates were more likely to be aware of ways to claim tax relief than SME business owners which means the latter will be missing out on the various ways to reduce their tax liabilities.

The most common areas where SMEs fail to identify allowances is in research and development and capital allowance relief. Business owners and their accountants are often unaware of what they may be entitled to which means they can’t take advantage in the same ways as larger corporates.

Knowledge is everything when it comes to doing everything necessary to ensure that a business isn’t paying too much tax. Some business owners attempt to take shortcuts by entering into tax avoidance schemes which can leave them at risk of severe penalties from HMRC.