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Britain’s small business economy is expected to grow nearly a fifth by 2025

The UK’s small business economy is expected to grow by nearly a fifth in total by 2025, but some areas are predicted to grow much quicker than others.

The predictions result from a survey by Hampshire Bank Trust and the Centre for Economics and Business Research (CEBR).

The CEBR research predicts that alongside the growth in the value of SMEs to the economy, the total number of SMEs in the UK will pass the one million mark in the coming years, with 1,022,200 predicted to be in business in the UK in 2025.

Meanwhile, it is predicted that SMEs will provide an additional 800,000 jobs in the UK economy over this period.

However, the research does not predict a uniform level of growth across the country. While Manchester and Leeds-based SMEs are predicted to grow their SME economies by 26 per cent from 2016 to 2025, another northern city, Sheffield, is predicted to see SME growth of just 14 per cent over the same period.

The London-based SME economy is by far the largest in the UK and already accounts for £152 billion of the UK’s £202 billion SME economy. It is expected to account for nearly £30 billion of the predicted £39 billion growth in the sector by 2025.

The research also quizzed SMEs on their expectations about the likely impact of Brexit, with more than one in three saying their growth expectations were lower than they were before the referendum. This compares to just one in ten that said the opposite.

Link: Britain’s small business economy predicted to be worth £241bn by 2025

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UK’s tax gap continues to fall

Figures released by HM Revenue & Customs (HMRC) show that the UK’s tax gap – the difference between tax owed and actual receipts – is continuing to fall.

The Revenue has revealed that the tax gap for the 2016-17 tax year was 5.7 per cent, down from six per cent in the previous year and 7.3 per cent in 2005-06. It says that, had the tax gap not fallen, a total of £71 billion less tax would have been collected last year.

The figures show that of the total tax that was unpaid, the largest proportion was from small businesses, with £13.7 billion not paid.

According to HMRC, taxpayer error was nearly twice as likely as criminality to be the culprit for missing tax, with errors costing the Revenue £9.2 billion in lost income, while criminality cost £5.4 billion.

Meanwhile, Income Tax, National Insurance and Capital Gains Tax had the biggest tax gap at £7.9 billion. The VAT gap, on the other hand, has fallen from 12.5 per cent in 2015-06 to 8.9 per cent in 2016-17.

Mel Stride, Financial Secretary to the Treasury, said: “These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.

“Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.”

Jon Thompson, Chief Executive of HMRC, added: “The UK is the only country in the world to regularly publish their tax gap in detail and at 5.7 per cent, it remains at its lowest for five years. I am pleased that the downward trend shows HMRC and HM Treasury’s continued hard work to tackle evasion and avoidance is working.

“HMRC is also working hard to help taxpayers get their tax right by offering support and investing in digital services to improve businesses’ record keeping and reduce errors.”

The Revenue is now touting the forthcoming launch of its flagship Making Tax Digital programme as the latest weapon in its arsenal as it looks to reduce the tax gap further.

Link: Low tax gap results in £71 billion for UK public services

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