how the tax system unfairly disadvantages smaller businesses (like mine)

As a non-VAT registered business (like half of all the other business registered in the UK), I can't reclaim the tax I'm charged by my suppliers on my running costs (utilities, marketing, insurances, equipment, etc).

This means my overheads and running costs are up to 20% higher than they might be otherwise if I were - and puts me at an unfair financial disadvantage against other firms who are VAT-registered (because they don't have to cover costs in the same way I do, in their being up to 20% lower...).

So, I hear you reasonably ask, why don't I simply register for VAT and stop griping about this?

The answer, I'm afraid, is that if I did I would likely price myself out of being able to win a lot of the work I currently do with smaller charities, community businesses, social enterprises, and the like: once VAT registered I would be legally required to pay the government up to 20% of all the fees I received from clients and customers (before costs) - so to avoid bankrupting myself, this means I'd need to add this additional amount to the invoices I generate. And as most of these groups in turn aren't VAT registered themselves, this means that they suddenly wouldn't be able to afford me: my price would be going up 20% overnight - but I wouldn't be benefitting from any of that additional fee, in having to pass it straight back to the government...

And is that fair? Well, at the time of this blog, there's increasing outcry about the rising cost of petrol and diesel - but as part of this, no-one seems to be pointing out that at least half of what we pay for this commodity is actually tax imposed by the government....

 

Tax is an emotive issue - many people seem to want to avoid paying as much of it as they can, and there are whole industries that exist to this end (for example, did you know that contracts awarded by the government in recent years have been to companies who've knowingly evaded paying nearly £20BILLION that should have been due in taxes?)

Some people feel that they're justified in this stance because they don't trust how the government uses the monies we pay in tax. And whilst I do have sympathy with this, governments change over time. My own position is that I want to try and be as consistent and honest with myself as I can, and so in tax, as with so many other things, I seem to go against 'accepted wisdom', in that I'm always making conscious decisions to increase my tax liability wherever I can... 

https://thirdsectorexpert.blogspot.com/2015/11/bonkers-why-im-staying-as-sole-trader.html

So whilst this post may have started off as a whine about VAT, now you're reaching its conclusion you'll hopefully realise that it's actually about trying to encourage us to have a wider and more grown up debate about tax than we might usually...