Description
File with regards to the unsung heroes of business entrepreneurs and their total tax contribution.
Entrepreneurs and their
total tax contribution
The unsung
heroes of
business
NOVEMBER 2012
Prelude in
association with
Contents
About the report: Tax & UK enterprise 3
Foreword from Ruby Parmar 4
About the methodology 5
Alex Cheatle – Ten Group 6
Andrew Noble – Health Management Limited 10
Hugh Robertson – RPM 14
Jonathan Quin – World First 18
Paul Wedgwood – Splash Damage 22
Rachel Clacher – Moneypenny 26
Rob Hamilton – Instant Of?ces 30
Conclusion 34
Prelude in
association with
About Prelude
Prelude creates and delivers programmes, events and initiatives with a
single purpose in mind: to help make Britain the most enterprising nation
in the world.
Prelude has worked with and supported over 1,000 of Britain’s most
experienced entrepreneurs. We provide support and a championing voice
for the fast-growing, job-creating businesses that the economy needs
so badly.
At the forefront of what we do is The Supper Club, home to a few
hundred of Britain’s most successful entrepreneurs from across all sectors.
It is our members’ experiences that shape the best practice we share with
those looking to emulate their success.
We have been described as ‘a Do Tank, not a Think Tank’. We like that
– ideas are two-a-penny. As any entrepreneur knows, it’s the execution of
an idea that counts! We help with that execution.
For more, visit www.preludegroup.co.uk
3 About the report
About the report:
Tax & UK enterprise
After enduring the longest recession in living memory, the UK economy
is now ?nally edging towards recovery, with GDP growing 1% in the last
quarter. Unemployment has been steadily decreasing but there is still a long
way to go. An upturn in the UK services industry is heartening, but the
manufacturing sector continues to struggle and bank lending is still failing
to reach the majority of cash-strapped businesses, despite various initiatives
launched by government. The UK’s economic recovery relies chie?y on
growth from the private sector, rather than economic lever-pulling within
government. In short, it is business rather than the state that is tasked with
creating jobs and driving the UK towards a more prosperous era.
While those in government may embrace the idea that entrepreneurial-
ism is fundamental to the future prospects of the country – witness, for
instance, the Prime Minister’s latest call for an ‘aspiration nation’ at the
Conservative party conference this is not necessarily a narrative that the
general public ?nds particularly compelling.
The recent media and parliamentary debates around whether busi-
nesses are paying the right amount of corporation tax may be partly to
blame for people’s antipathy towards business in general. These debates
however often ignore sizeable contributions that business makes to the
UK. In particular, the contribution of the relatively small number of
entrepreneurs who set up and grow medium-sized businesses from scratch
is often overlooked. This group of just thousands not only enrich the UK’s
innovation landscape through the services they provide and the products
they produce, they also create many of the new jobs as well as contribute
new sources of tax receipts for the UK Treasury. Yet their input is seldom
acknowledged by people beyond the con?nes of government and tradi-
tional business circles.
The result is the perpetuated myth that successful business owners are
the sole and sel?sh bene?ciaries of the fruits of their business’s output.
The British Chambers of Commerce have attempted to address this lack
of awareness through their ‘Business is Good for Britain’ campaign, but
more needs to be done to change the tone of the debate. The key mes-
sage of this report is that we need to do all that we can to encourage and
support the relatively small cohort of business innovators who drive value
into our economy and make such a signi?cant and mostly overlooked
contribution to public ?nances in the UK.
The report is meant only to provoke thought. It does this by drawing
on a handful of real-life experiences and by analysing the tax accounts
of those entrepreneurs who have kindly opened their books to PwC for
analysis.
Authors
Duncan Cheatle, CEO Prelude Group, co-founder StartUp Britain
Rebecca Burn-Callander, web editor Management Today
The unsung heroes of business: Entrepreneurs and their total tax contribution 4
Foreword from Ruby Parmar
Partner and Head of Private Business at PwC
The unrecognised heroes of British business
In many respects entrepreneurs have become the unrecognised heroes of
British business. Traditionally entrepreneurs are dynamic, creative and
risk-taking individuals who use innovation to create wealth in even the
hardest of economic climates, and this is borne out by the seven entrepre-
neurs who have taken part in this study.
In particular, this study quanti?es the signi?cant contribution that
successful entrepreneurial companies make to the public ?nances in the
UK through the taxes they pay and collect. It also highlights the wider
economic contribution made by these businesses as they have continued
to grow through the recession. Even where pro?ts have stalled, these ?rms
have continued to grow their workforce with the expectation that they will
get through the downturn.
One view that we see expressed by the public and in the media is that
entrepreneurs are in business purely for their own interests. This view
has often confused me, as it lacks all understanding of what it is to be an
entrepreneur and their valuable place in society. As the interviews in this
report show, it is not easy to build a successful business from scratch.
Most of the businesses in this report started as one or two individuals
with a great idea. Some of them started from home (where 60% of all
small businesses start), some were fortunate enough to have access to
business premises, one started from a cow-shed and another began with
little more than a telephone and a phone book. However and wherever
they began, these businesses have become successful largely due to the
hard work and persistence of the people who founded them.
The stories in the report show how taking risks and using initiative
can generate wealth, jobs and large amounts of tax revenue. Whether it’s
making currency exchanges quicker and easier, providing trusted out-
sourced PA services or creating cutting edge video games, the ability to be
agile and to respond to change in order to exploit opportunities with new
products and services, is a common theme.
The personal and ?nancial sacri?ces taken by entrepreneurs,
particularly in the early years, should not be underestimated. One
entrepreneur sold everything he had to raise start-up capital; another
funded his business entirely from credit cards. Happily these risks paid
of, but many entrepreneurs will sufer several setbacks before building a
successful business.
All of the entrepreneurs in this study have created jobs and wealth for
workers. They have bene?ted their local economies and the wider UK
economy by paying increasing amounts of tax to the UK Exchequer. These
case studies show how vital it is that the contribution made by entrepre-
neurs is recognised and that they are encouraged to keep taking risks and
to grow their businesses. A business that is started today by one person
in a spare room with a great idea and a bank overdraft, could soon be
employing many people and generating millions of pounds in tax revenue.
5 About the methodology
About the methodology
This report uses data provided by the participating businesses on their
signi?cant UK tax payments. It uses the PwC Total Tax Contribution
methodology which looks at all the diferent taxes that businesses pay and
administer, including employment taxes, VAT and other taxes as well as
corporation tax.
The tax payments are split into taxes borne and taxes collected. Taxes
borne are those taxes that are a cost to a business and afect its results.
Taxes collected are taxes that, while generated by a business’s operation,
do not directly afect its results, but which are administered on behalf of
the UK Government.
The businesses provided details of tax payments for at least the ?ve
most recent business years for which data was available. As the businesses
have diferent ?nancial year-ends, there is some variation in the precise
time period covered by each business. In addition some were able to
provide data for more than ?ve years.
1
The study does not include the tax paid by the owners of the busi-
nesses on the dividends that they may receive from the business. This
is because the tax due will be afected by whether or not dividends are
declared and the personal circumstances of the individuals. The results
do include the tax withheld by businesses on any payments of salary to
owners who are also employed by their business.
The results do include the tax paid by partners in respect of the pro?ts
made by the partnership in which they hold a share. This is because
partnerships do not pay corporation tax. The partners pay income tax
based on the partnership’s pro?t as, for tax purposes, the partners and the
partnership are viewed as a single entity. The only business in the study
that operates, in part, through a partnership is Instant Ofces.
To illustrate what the total tax borne and collected (in the last ?ve
years) equates to in terms of contribution to public services we have
applied a consistent measure of how many newly-quali?ed Band 5 nurses
this would pay for for one year. That ?gure was sourced from the NHS
website.
1. While PwC has analysed the data received from the businesses to produce the study
results, it has not veri?ed, validated or audited the data and cannot give any undertaking as to
the accuracy of the study results.
The unsung heroes of business: Entrepreneurs and their total tax contribution 6
Alex Cheatle
Ten Group
‘I didn’t pay myself for the ?rst 18 months and built up debts to pay other
people’s wages. I was basically surviving on bread and water.’
Alex Cheatle is the boss of lifestyle management ?rm Ten Group. He
launched the business from a spare room in 1998 with Andrew Long.
‘I sold everything I owned to start the business,’ he recalls. ‘I didn’t pay
myself for the ?rst 18 months and built up debts to pay other people’s
wages. In fact, I went backwards quite savagely in the net worth stakes. I
was basically surviving on bread and water.’
But Cheatle’s hard work and sacri?ce paid of, and over the past 14
years Ten has grown into an international, 350-employee strong business
turning over £20m a year. Clients – or members, to use Ten terminology
– use them for everything from booking concert tickets to ?nding a good
local plumber.
As Ten’s revenues have grown, so has its tax bill. ‘Pay us £120, and £20
goes to HMRC as VAT,’ Cheatle explains. ‘Then we have to spend £55 on
salaries, of which around £14 is funnelled out through income tax and
national insurance. So, before other taxes like corporation tax have even
kicked in, £34 of the £120 has gone to the taxman.’
But Cheatle is pragmatic about the UK tax regime. ‘I don’t have any-
thing against paying tax,’ he says. ‘Like most entrepreneurs, I am obsessed
with creating really high quality products and services, building a team; I
am not obsessed with reducing the rate of corporation tax.’
Is government doing enough to ensure that small ?rms are encouraged
and incentivised by the UK tax regime, rather than penalised? Cheatle
pauses. ‘What UK entrepreneurs need are clearer rules and lower levels of
tax on genuinely entrepreneurial ventures,’ he says. ‘There are a few things
that government is doing right, like the Enterprise Investment Scheme and
R&D tax credits, but otherwise there should be a ?at, competitive rate for
all small businesses.’
Indeed, it seems fair that entrepreneurs – as the risk-takers and grafters
of the enterprise world – should receive some support in return for their
services to the UK economy. Nearly half of the UK’s GDP is generated by
small ?rms after all. Over the last ?ve years in business, Ten Group has
generated £16.7m for Her Majesty’s Revenue. By continually reinvesting
into his business, Cheatle is ensuring that his concierge service will keep
on generating tax receipts for the taxman long into the future.
And while long-term rewards may await the successful entrepreneur,
in the short term, running a business is a serious undertaking, and
As an entrepreneur,
your job is to take
the biggest risks in
the business and
to put yourself on
the line more than
anyone else
7 Alex Cheatle: Ten Group
entrepreneurs are under the constant threat of ?nancial ruin. ‘As an
entrepreneur, your job is to take the biggest risks in the business and to
put yourself on the line more than anyone else,’ explains Cheatle. ‘You are
always the last person to get paid and the ?rst to put your hand in your
pocket in times of trouble.’
So how can government convince more people to start up businesses
and contribute to UK plc? ‘For the most part it should do nothing,’ says
Cheatle. ‘I’m not a big fan of government trying to pick winners. But,
as entrepreneurs are the people that create the jobs, the wealth, and the
innovations of tomorrow, our tax system should re?ect that.’
‘There are a few things that government is doing right, like the Enterprise
Investment Scheme and R&D tax credits, but otherwise there should be a
?at, competitive rate for all small businesses.’
Ten Group
The total tax pro?le in 2010/2011
In its business year to 31 August 2011 Ten Group generated revenues of
£20.1m, pro?ts of £0.7m and paid £5.2m in taxes to the UK government.
In the year 2010/2011 corporation tax was less than 10% of the taxes
borne by Ten Group, with 83% (£893,000) relating to employers’ national
insurance contributions.
Taxes borne 2010/2011
6%
11%
83%
Corporation tax
Business rates
Employers’ NIC
For every pound of taxes borne by the company a further £3.89 is paid
to government in taxes collected.
In 2011, Ten Group paid over £2m in VAT to HMRC on the fees
received from its members. The VAT payment is made up of VAT received
from members’ fees, less the VAT incurred on the Group’s purchases.
Total Tax Contribution
in the last ?ve years,
equivalent to
789
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 8
Taxes borne and collected 2010/2011
Net VAT
PAYE and employee NIC
Total taxes borne
Taxes Collected Taxes Borne
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
16.7
Taxes collected 12.8
Taxes borne 3.9
Over the last ?ve years Ten Group has paid £16.7m in taxes borne
and collected. In 2011, Ten Group paid UK corporation tax for the ?rst
time. In earlier years Ten Group made tax losses or used tax losses from
earlier years to reduce its corporation tax bill, nevertheless the pro?le of
the taxes paid by Ten Group has been consistent over the period and has
shown strong growth throughout.
Total Tax Contribution
Taxes borne
Taxes collected
2005 2004 2006 2007 2009 2008 2010 2011
4,000
5,000
6,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
Ten Group is a people intensive business and so it is no surprise that
the biggest element of its Total Tax Contribution is taxes on employment
such as social security contributions and personal income tax withheld
from employees’ salaries.
9 Alex Cheatle: Ten Group
At the end of August 2011, Ten Group was employing 274 workers.
Each of these jobs generated £10,400 on average in 2011 in terms of
employment taxes and national insurance contributions. Despite the
global economic crisis, Ten Group has tripled its number of employees
in the last ?ve years with a similar increase in the amount of employment
taxes borne and collected.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2005 2004 2007 2008 2009 2010 2011
2,000
2,500
3,000
1,500
1,000
500
–
200
250
300
150
100
50
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 10
Andrew Noble
Health Management
Limited
‘The ?nancial reward is not a motivator at all. It’s about having independ-
ence and creating something meaningful.’
Entrepreneurial ventures can spring from the most unlikely places.
‘We started our business in 2002 out of a basement on Lots Road,’
laughs Andrew Noble, boss of occupational health consultancy Health
Management. ‘I had to borrow a desk from a friend. I started with liter-
ally a telephone and a phone book. That was it.’
But despite Health Management’s modest start in life the business
?ourished, turning over £100,000 in its ?rst year. It was a dream come true
for ?rst-time entrepreneur Noble. ‘I’d wanted to start my own business
since I was at school,’ he says. It had taken rather longer than Noble had
anticipated, however. ‘I went into the City. It was only supposed to be for
a short while but it turned into 10 years. I worked in corporate ?nance and
it only made me more desperate to launch a business myself.’
The opportunity ?nally arose when Noble was approached by a friend,
Dr Alasdair Emslie. Emslie and his brother Richard had previously run a
similar healthcare business. ‘It just felt right,’ says Noble.
The concept may have been perfect but the timing could have been
better. Noble was a newly-wed when he quit his job and started Health
Management, fresh back from his honeymoon. ‘My wife was very under-
standing,’ he says. ‘We would be working a minimum of 12 hours a day,
seven days a week. When the business was moved to Sussex, I would stay
in a B&B for two nights then go back to London.’
Noble now employs roughly 350 staf nationwide, providing advice
and hands-on care for clients ranging from SME to enterprise size. ‘We
have saved lives and prevented illnesses,’ says Noble. ‘We were even on
site at London 2012, assessing the construction workers building the
Olympic Park.’
Health Management doesn’t only help to up productivity and wellbe-
ing among its clients, it also makes a huge contribution to the wider
economy in terms of training. ‘We are the largest independent training
body of consultant occupational physicians outside the NHS,’ explains
Noble. ‘Occupational medicine is largely done in the private sector; it’s
the only branch of medicine where the NHS does not dominate.’
Not to mention the ?rm’s annual tax contribution. ‘VAT is the big-
gest tax that we collect for government,’ says Noble. ‘As consultants in
Health Management
doesn’t only help to
up productivity and
wellbeing among its
clients, it also makes
a huge contribution
to the wider
economy in terms
of training
11 Andrew Noble: Health Management Limited
occupational health, we are standard rated. We do claim some of it back
but essentially on £30m sales we are adding 20% for government. That’s
huge.
‘It is about £28,000 to government in total tax by each of our employ-
ees,’ he continues. ‘That’s adds up to over £7m a year. How much does a
new school cost? Maybe £10m? Over 10 years, Health Management could
set up seven schools!’
Indeed, Noble is very clear on his motivations for running the busi-
ness. ‘It’s never been about money,’ he says. ‘The ?nancial reward is not a
motivator at all. It’s about having independence and creating something
meaningful. If Health Management had failed I would have tried again
ten times over.’
But Noble does admit that running a business can be challenging.
‘I feel the responsibility of my staf enormously,’ he says. ‘That’s what
makes me cautious. I’m responsible for the livelihoods of hundreds of
people. Every month our payroll is about £750,000. That’s way beyond
what any of the individual directors could be responsible for. It’s an
enormous weight on our shoulders.’
That said, Noble is adamant he wouldn’t change a thing. ‘I could
never go back to an investment bank,’ he says. ‘Once you’ve experienced
the sheer excitement of creating something and building a team, you are
hooked.’
‘VAT is the biggest tax that we collect for government,’ says Noble. ‘As
specialist consultants to business, we are standard rated. We do claim
some of it back but essentially on £30m sales we are adding 20% for
government. That’s huge.’
Health Management Limited
The total tax pro?le in 2011
In 2011 Health Management Limited generated revenues of £24.7m, prof-
its before tax of £2.4m and paid £7.8m in taxes to the UK government. As
a people-intensive business with average salaries in excess of the national
average, it is not surprising that Health Management’s largest tax borne is
employer’s NIC contributions of nearly £1m in 2011. This accounted for
71% of taxes borne in 2011 with corporation tax making up only a ?fth
of taxes borne in that year.
Total Tax Contribution
in the last ?ve years,
equivalent to
1,170
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 12
Taxes borne 2011
20%
8%
71%
1%
Corporation tax
Business rates
Employers’ NIC
Other
For every pound of taxes borne by the company a further £4.64 is paid
to government in taxes collected.
VAT of £3.7m made up nearly half of the all taxes borne and collected
by Health Management Limited in 2011. The VAT payment is made up
of VAT received from customers less the VAT incurred on the company’s
purchases.
Taxes borne and collected 2011
PAYE and NIC
Taxes Collected Taxes Borne
7,000
6,000
5,000
4,000
3,000
2,000
1,000
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Net VAT
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
24.8
Taxes collected 19.0
Taxes borne 5.8
Over the last ?ve years the company has made tax payments of nearly
£25m to the UK government – more than the company’s entire turnover
in 2011.
Although Health Management Limited’s Total Tax Contribution has
grown steadily over the last ?ve years, the amount of corporation tax paid
13 Andrew Noble: Health Management Limited
has ?uctuated over the years as the company’s pro?ts have varied. In 2011
the company’s Total Tax Contribution was over three times as much as its
Total Tax Contribution in 2007.
Total Tax Contribution
Taxes borne
Taxes collected
2007 2008 2010 2009 2011
4,000
5,000
6,000
8,000
7,000
9,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
Between 2007 and 2011, the number of people employed by the
company increased by 168% to 273. In the same period, the total employ-
ment taxes borne and collected by the company had increased by 277%,
equating to £13,266 per employee in 2011.
Not only was the company employing more people in 2011 than in
2007, but on average they were each earning £4,000 a year more and the
employment taxes per employee were also almost £4,000 more per year.
Total employment taxes
2007 2008 2010 2009 2011
2,000
2,500
3,000
3,500
4,000
1,500
1,000
500
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
200
250
300
150
100
50
–
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
Taxes borne
Taxes collected
Employees
The unsung heroes of business: Entrepreneurs and their total tax contribution 14
Hugh Robertson
RPM
‘I think of myself less as an entrepreneur and more as an ethical employer.’
There’s no such thing as a typical entrepreneur. They hail from many
diferent cultural, academic and ?nancial backgrounds. Sometimes, even
the entrepreneurs themselves are surprised by the direction their careers
take. Take Hugh Robertson, founding partner of marketing agency RPM.
When he was a youngster, he was determined to be a rugby player when he
grew up – until an injury forced him of the ?eld. ‘I couldn’t play any-
more,’ he says, ‘and that was upsetting. I became rebellious and got kicked
out of school with just a few O’Levels.’
That may have been the end of Robertson’s sporting career but it was
the beginning of his entrepreneurial journey. He got a job driving trucks
for an events agency on the weekend to make a little pocket money.
‘I loved it,’ he says. ‘I ended up applying for a full-time job and never
looked back.’
It was while working at this agency that Robertson met the two future
co-founders of RPM. ‘We wanted to do things diferently and we pitched
our ideas to the board but they turned us down,’ he says. ‘So we borrowed
£5,000 and took the plunge.’
In January 1993, RMP Ltd launched out of ‘a cow shed in
Wokingham,’ recalls Robertson. The trio had no clients, very little
start-up capital, and bills to pay so they secured a £70,000 overdraft from
the bank to tide them over for those tough ?rst months. ‘We soon got a
call from the bank manager,’ remembers Robertson, ‘saying that he had
changed his mind and was calling the loan in. We had one month to turn
the business around.’
Most companies would have been driven to the wall but Robertson and
his co-founders pitched their hearts out over the next four weeks, landing
Marks & Spencer as a client. Robertson worked all hours to keep the
business on track, ‘I’m a ?rm believer in leading from the front,’ he says.
I would never ask my people to do something that I wouldn’t, so I’d drive
lorries, I’d take the weekend shifts.’
The business has now grown into a multi-discipline agency, running
all kinds of global campaigns, from pop-up events and social strategy to
employee engagement programmes for clients including Reebok, Adidas
and Diageo. Robertson bought out his other co-founders in 1998 and
2005 – ‘When we were not united we were destructive for the business,’ he
explains – and now runs the business with three partners, one of the his
brother. ‘Doing it on your own can be difcult,’ he admits.
15 Hugh Robertson: RPM
RPM employs 175 people today. People that Robertson describes as the
?rm’s most valuable asset. ‘One of the most rewarding parts of my job is
getting the best out of the people who work for me,’ he says. ‘I think of
myself less as an entrepreneur and more as an ethical employer.’
Indeed, Robertson takes his responsibilities as an employer very seri-
ously. He has scaled the company gradually, through organic growth, in
order to make sure that jobs are never at risk, nor too much strain placed
on his staf. ‘We only turn over £25m,’ he says. ‘And I’ve chosen to go for
the slow burn. It’s more important to me to build a long-term sustainable
business rather than a money-spinner.’
It seems that making millions isn’t at the top of Robertson’s priority
list: ‘Not at the expense of the business or my people,’ he says. ‘Being a
good entrepreneur sometimes means being sel?ess. Making decisions for
the greater good of the business and not yourself…’
We all need to pay taxes but the current system doesn’t always provide a
level playing ?eld in an ever more global market
RPM Limited
The total tax pro?le in 2012
In the business year ended 31 March 2012, RPM generated revenues of
£25.1m, pro?ts before tax of £1.6m, and paid £5.7m in taxes to the UK
government. Corporation tax makes up just over a third of the company’s
taxes borne (37%), with employers’ national insurance contributions
accounting for the remainder.
Taxes borne 2011/2012
37%
63%
Employers’ NIC
Corporation tax
For every pound of taxes borne by the company a further £3.70 is paid
to government in taxes collected.
VAT of £2.6m made up 46% of the all taxes borne and collected by
RPM in 2011/2012. Although VAT is a not a cost to RPM as it is paid
by the customers, it represents a bene?t to the UK Exchequer that arises
directly as a result of the activities of RPM.
We only turn over
£25m
Total Tax Contribution
in the last ?ve years,
equivalent to
850
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 16
Taxes borne and collected 2011/2012
PAYE
Employee NIC
Net VAT
Taxes Collected Taxes Borne
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
18.0
Taxes collected 14.2
Taxes borne 3.8
Over the last ?ve years the company has paid £18m in taxes borne and
collected. Overall the amount of taxes paid by RPM has grown over the
last ?ve years, though it sufered a dip in 2009 and 2010, mainly due to
reductions in taxes collected. This appears to be due to slight reductions
in revenue and staf numbers.
Total Tax Contribution
Taxes borne
Taxes collected
2008 2009 2011 2010 2012
4,000
5,000
6,000
7,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
RPM had a workforce of some 185 people at the end of March 2012.
Each of these jobs generated on average £14,100 in taxes and national
insurance contributions in the year to 31 March 2012. The amount of
employment taxes can be seen to generally correlate to the number of
employees. An increase in staf during 2011/2012 was only fully re?ected
in the taxes paid in 2012. Over the last ?ve years the number of staf has
increased by 85% and the employment taxes by nearly 80%.
17 Hugh Robertson: RPM
Total employment taxes
Taxes borne
Taxes collected
Employees
2008 2009 2011 2010 2012
2,000
2,500
3,000
1,500
1,000
500
–
80
180
160
140
120
100
200
60
40
20
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 18
Jonathan Quin
World First
‘There’s a sign on the M3 as I’m driving to work saying, ‘It costs £1m to
run a wing of this hospital for a year’. When you think about it that way, I
honestly don’t mind paying tax.’
Less than a decade ago, if you wanted to send money overseas you had
to go into a bank with two forms of identi?cation and the money would
take ?ve days to transfer. Today, the process is far less arduous. Jonathan
Quin, co-founder of foreign exchange ?rm World First, is one of the
entrepreneurs building the technology to allow these transactions to take
place almost instantly. World First even recently broke the world record
for fastest payment, completing a currency transfer in just six minutes.
Quin founded World First with Nick Robertson in January 2004. The
pair met at Citibank in the mid-nineties and both were frustrated that
while large companies received great exchange rates from the banks,
smaller businesses were usually ofered far poorer deals. ‘We saw an
opportunity there,’ says Quin. ‘Not only were companies outside the
FTSE 250 getting worse currency pricing, they were also getting terrible
customer service.’
The pair remained in the banking industry for 18 months after their
‘eureka moment’ to save money to launch the new venture: ‘I wanted to
start our new business without any debt,’ explains Quin. And World First
has indeed been debt-free since inception, serving private individuals and
companies alike, growing organically to become an international business
with ofces in Asia and the US, bringing much-needed revenue into the UK.
The cornerstone of World First’s success is its commitment to cus-
tomer service. This goes beyond the usual ‘answer the phone within three
rings’ too. Bonuses for staf manning the phones are based on feedback
from customers and the company prides itself on employing ‘charming’
and ‘efcient’ people. World First must be doing something right; the ?rm
boasts incredibly high account retention rates, as well as adding 30% new
customers every year. ‘We don’t focus on customer service just because
it’s good for business,’ says Quin. ‘I want to treat people like I want to be
treated. I genuinely want to improve the industry.’
World First currently employs 140 staf, up from 110 last year. ‘It’s been
a straight line up in terms of headcount,’ said Quin. ‘And I really like that
some of the staf that joined World First as their ?rst job at the start are
still with us today.’
But running a global, fast-growing business is not without its chal-
lenges. ‘It is slightly stressful that we have overheads of £1.1m every
The cornerstone of
World First’s success
is its commitment to
customer service
19 Jonathan Quin: World First
month that we have to pay whether we make money or not,’ says Quin.
Tax is, of course, a large part of this overhead. ‘It would have been better
if government hadn’t put up national insurance,’ he says. ‘I would rather
have kept that the same and not reduced corporation tax, because that
comes out after everything else.
‘Still, we’ll pay £2m this year in corporation tax alone,’ he explains.
‘But I think of it as a donation to the world. There’s a sign on the M3 as
I’m driving to work saying, ‘It costs £1m to run a wing of this hospital
for a year’. When you think about it that way, I honestly don’t mind
paying tax.’
As a technology-forward, highly cash generative ?rm, World First gets
a lot of attention from private equity companies. But Quin isn’t quite
ready to hand over the reins. ‘I’ve always wanted to be an entrepreneur,’ he
says. ‘I started my ?rst business – selling personalised number plates – at
16 years old and I promised myself that one day I would work for myself.’
Indeed, Quin can’t ever imagine retiring. He wants to keep giving back
to the enterprise ecosystem as long as he can. ‘I don’t like golf,’ he laughs.
‘And I’m just so grateful that I’m not still a banker. I want to keep running
this business as long as I can – it is a joy.’
‘It would have been better if government hadn’t put up national insur-
ance. I would rather have kept that the same and not reduced corporation
tax, because that comes out after everything else’
World First
The total tax pro?le in 2011/2012
In the year to 31 January 2012 World First generated gross pro?ts of
£15.1m, pro?t before tax of £4.5 million, and paid £3.6m in taxes to the
UK government. Corporation tax makes up over half of the taxes borne
by the company (51%), followed by employer’s national insurance contri-
butions (26%) and irrecoverable VAT (18%).
Taxes borne 2011/2012
4%
51%
26%
18%
1%
Corporation tax
Business rates
Employers’ NIC
Employment taxes
Irrecoverable VAT
For every pound of taxes borne by the company a further £0.68 is paid
to government in taxes collected.
Total Tax Contribution
in the last ?ve years,
equivalent to
472
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 20
World First facilitates foreign currency transactions for its custom-
ers and it cannot charge VAT on these transactions. It therefore cannot
reclaim the VAT on its purchases and this irrecoverable VAT thus becomes
a cost to the company and is a tax borne. For non-?nancial sector com-
panies VAT is a tax collected as it is charged to customers and reclaimed
on the company’s own purchases. In the 2011/2012 business year, the
company paid £397,000 in irrecoverable VAT.
Taxes borne and collected 2011/2012
PAYE
Employee NIC
Taxes Collected Taxes Borne
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
10.0
Taxes collected 3.8
Taxes borne 6.2
Over the last ?ve years the company has paid £10m in taxes borne and
collected. The pro?le of the taxes paid by World First is consistent and
shows strong growth throughout for both taxes borne and taxes collected.
Total Tax Contribution
Taxes borne
Taxes collected
2006 2005 2007 2008 2010 2009 2011 2012
2,500
3,500
4,000
1,500
2,000
3,000
1,000
500
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
21 Jonathan Quin: World First
By the end of January 2012 World First had a workforce of 110. Each
of these jobs generated on average £18,800 in taxes and national insur-
ance contributions in the year to 31 January 2012.
Over the last ?ve years the work force has increased from 40 to 110,
which is nearly a threefold increase. In the company’s 2011/2012 ?nancial
year the employment taxes paid were more than ?ve and a half times the
amount paid in the 2007/2008 year.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2007 2008 2009 2011 2010 2012
2,000
2,500
1,500
1,000
500
–
80
100
120
60
40
20
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 22
Paul Wedgwood
Splash Damage
‘I put everything in and there was no way back.’
The videogame industry has undergone many changes over the past
decade. Once dominated by giants like Sony and Ubisoft, there is now
a raft of new, independent developers creating games for consoles and
online audiences alike. This trend has both increased the choice for
consumers, and given rise to an era of innovation, both within the games
themselves, and in terms of new business models.
Paul Wedgwood is one entrepreneur riding this wave of innovation. He
founded games developer Splash Damage in the summer of 2001, and the
Kent-based studio now develops games for the Playstation, PC, Xbox 360
and creates multi-player games for the web. The studio boasts 2.5 million
players to date and has won over 300 awards including one BAFTA.
Most signi?cant, from an economic point of view, is Splash Damage’s
business model. It is one of a handful of UK companies that makes its
revenue exclusively from exports: while its titles are played all around the
world, its clients are all based in the US. ‘We’re fantastic for the economy,’
says Wedgwood.
All this has been achieved with no external debt. ‘We’ve never had
corporate ?nance or any external investors,’ says Wedgwood. ‘I own the
whole business today and it’s valued at around £100m.’
Not that the entrepreneur had any idea how successful the business
would be when Splash Damage ?rst launched. ‘I had £25,000 saved up and
I put the whole lot into the start-up,’ he says. ‘I wasn’t aware – in those
days – of ways that I could invest in the business and reclaim any tax. I put
everything in and there was no way back.’
In the 11 years since inception, Wedgwood has scaled Splash Damage
to employ 84 full-time staf. People are a huge part of what motivates
Wedgwood in business. ‘I run Splash Damage putting people ?rst,’ he
says. ‘I’m very proud that many of our original staf are still here. I have
given them 12.5% of the ?rm in share options so they will bene?t if we
ever sell the business.’ Wedgwood has no immediate plans to exit but adds
that Capital Gains Tax is no barrier to a sale: ‘Entrepreneurs Relief is
generous and reasonable,’ he says.
‘We only ever lose staf to the US,’ he continues. ‘We’ve never made
staf redundant, which is rare in this industry.’ Employing a large work-
force also involves a substantial tax contribution: ‘We pay over £1m in
PAYE, NIC and corporation tax each year,’ says Wedgwood.
In the 11 years since
inception, Wedgwood
has scaled Splash
Damage to employ
84
full-time staf
23 Paul Wedgwood: Splash Damage
Wedgwood’s story is one of rags to riches. ‘I grew up on a South
London council estate and left school at 15,’ explains Wedgwood. ‘I man-
aged to get a job on the Tottenham Court Road at 16, selling PCs. That
was right at the beginning – I sold ?oppy discs to the likes of Stephen
Fry and Bill Oddie.’ His later career spanned investment banking and
even a stint in Downing Street but Wedgwood always knew his future lay
in technology. He feels incredibly lucky to be running a business in an
industry he loves. ‘I pay people to make video games,’ he says. ‘It’s the
most incredible job.’
‘Entrepreneurs Relief is generous and reasonable.’
Splash Damage
The total tax pro?le in 2010/2011
At 70%, employers’ national insurance contributions were by far the big-
gest element of the taxes borne by the company in the year to 31 March
2011. Corporation tax accounts for only just over a ?fth of taxes borne.
Taxes borne 2010/2011
21%
10%
70%
Corporation tax
Business rates
Employers’ NIC
For every pound of taxes borne by the company in its 2010/2011
?nancial year a further £1.30 is paid to government in taxes collected.
The taxes collected relate to personal income tax and employees’
national insurance contributions that the company withholds from
employees’ salaries. Splash Damage does not have to charge VAT on the
sales to the majority of its customers as they are based in the US. It does
however have to pay VAT on the goods and services that it buys, but it is
allowed to reclaim this VAT. The company therefore has a net VAT refund,
rather than a net VAT payment. As the VAT refund is a repayment of
tax already paid on its purchases, it is not included in the taxes collected
?gures. In 2011 the VAT refund was £155,000.
Total Tax Contribution
in the last ?ve years,
equivalent to
170
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 24
Taxes borne and collected 2010/2011
PAYE
Employee NIC
Total taxes borne
Taxes Collected Taxes Borne
700
600
500
400
300
200
100
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
3.6
Taxes collected 2.1
Taxes borne 1.5
Over the last ?ve years the company has paid £3.6m in taxes borne and
collected. The pro?le of taxes collected has been consistent over the last
eight years showing a year-on-year increase. Taxes borne however dipped
signi?cantly in 2010 as the company paid no corporation tax in that year.
This was due to much lower pro?ts in that year, but also the company
received a signi?cant refund of corporation tax for earlier years due to the
?nalisation of relief for research and development activities.
Total Tax Contribution
Taxes borne
Taxes collected
2005 2004 2006 2007 2009 2008 2010 2011
1,000
800
600
400
200
1,200
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
By far the largest amounts of tax paid by Splash Damage relate to
taxes on employment. At the end of March 2011 the company employed
62 people (this has since risen to 84). Each of these jobs generated
25 Paul Wedgwood: Splash Damage
£15,400 on average in employment taxes and national insurance contri-
butions in 2011.
Over the last ?ve years Splash Damage has doubled its number of
employees, but the total amount of employment taxes paid has increased
by nearly 175%. The increase in taxes re?ects not only the increase in staf
numbers, but also increase in average salaries. The average employment
taxes per employee have increased by just over 30% in the last ?ve years.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2005 2004 2007 2008 2009 2010 2011
800
1,000
1,200
600
400
200
–
50
60
70
40
30
20
10
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 26
Rachel Clacher
Moneypenny
‘Once you reconcile yourself to the possibility of failure, you have the
freedom to achieve exciting things.’
Start-ups are often launched with the aim of solving a problem or ?lling
a gap in the market. This was certainly the case with outsourced PA and
answering service, Moneypenny. Indeed, founders Rachel Clacher and her
brother Ed were both already running successful businesses when their
‘eureka’ moment struck.
Ed was the owner and sole employee of a graphics business and was
struggling to juggle customer service alongside labour. He took on a
telephone answering service to free up some of his time. However, when a
big client called in to place a large order and the telephone operative said,
‘What do you expect me to do? I’m just a telephone ordering service!’ it
became clear that the solution has shortcomings.
‘Ed lost the order,’ recalls Clacher. ‘We decided there was a genuine
need for an outsourced PA and answering service that you could trust as
though it was your own team.’
The business was launched in 2000. ‘We set up in a spare area in my
husband’s ofce,’ says Clacher. ‘We tried to make it look grown up by
painting the walls and putting in nylon carpets but we had very little
money.’ The business grew organically from there. ‘We worked 100
hours a week,’ says Clacher. ‘It’s all a bit of a fantastic blur now.’ As
Moneypenny took on its ?rst clients and they paid their invoices, Clacher
would hire new PAs. ‘We’ve never borrowed a penny from anybody,’
she says. Moneypenny has also never received any form of government
grant: ‘We get R&D tax credits but otherwise there’s not much help,’
says Clacher.
Despite operating on a tight budget, Moneypenny was highly in-
novative from the outset. Its back-end has been built in-house from the
ground up and now comprises a highly complex system that can convert
voice calls to text, divert clients to their bespoke PAs and manage all the
company’s data. ‘Only large multi-nationals have this kind of technology,’
says Clacher.
The technology is not currently licensed out to other businesses but
it is a possible revenue stream. ‘The interesting thing about what we are
doing is that while most technology drives people apart, we are trying
to use it to create stronger relationships,’ explains Clacher. ‘To help
you get through to a real person, or speak to someone who understands
your needs.’
Despite operating
on a tight budget,
Moneypenny was
highly innovative
from the outset
27 Rachel Clacher: Moneypenny
Moneypenny also makes a huge contribution in the local community.
Based in Wrexham near Chester, the ?rm hasn’t advertised for a PA or
reception role for 10 years. ‘Over 900 people applied to work for us last
year,’ says Clacher. ‘We are committed to the area and proud to invest
in the local area. Every two years we apply to the Sunday Times Best
Companies to Work For. We came 11
th
last year, and we were the only
telephone service to feature in the list.’
Clacher is hugely proud of the diference her ?rm has made in the
community, and of all the business it has achieved since inception.
But Clacher also enjoys the thrill of building a business, of being her
own boss. ‘When you are an entrepreneur, you are master of your destiny,’
she explains. ‘Both Ed and I have always been prepared to take risks. Once
you reconcile yourself to the possibility of failure, you have the freedom
to achieve exciting things’.
‘We get R&D tax credits but otherwise there’s not much help.’
Moneypenny
The total tax pro?le in 2011
Corporation tax made up a little less than half of the taxes borne by the
company (46%) in 2011. Employers’ national insurance contributions
account for a further 42%, and business rates 10%.
Taxes borne 2011
46%
10%
42%
2%
Corporation tax
Business rates
Employers’ NIC
Other
For every pound of taxes borne by the company a further £2.60 is paid
to government in taxes collected.
VAT of £1.4m made up nearly half of all taxes borne and collected by
Moneypenny in 2011. VAT is not a cost to Moneypenny as it is paid by the
customers, but it nevertheless represents a bene?t to the UK Exchequer
that arises directly as a result of the activities of Moneypenny.
Total Tax Contribution
in the last ?ve years,
equivalent to
538
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 28
Taxes borne and collected 2011
PAYE
Employee NIC
Net VAT
Taxes Collected Taxes Borne
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
11.4
Taxes collected 8.5
Taxes borne 2.9
Over the last ?ve years the company has paid £11.4m in taxes borne
and collected. The pro?le of the taxes paid by Moneypenny has been
consistent over the period and has shown steady growth throughout.
Total Tax Contribution
Taxes borne
Taxes collected
2006 2007 2008 2009 2010 2011
2,500
3,000
3,500
2,000
1,500
1,000
500
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
A key way in which the company contributes to the economy is
through employment. Moneypenny currently employs some 220 workers.
Each of these jobs generated £5,600 on average in taxes and national
insurance contributions in 2011.
Over the past ?ve years, Moneypenny has doubled its number of
employees against a background of economic turmoil and increasing
unemployment in the UK as a whole. In the same period, the employment
taxes that it pays to HMRC have increased by nearly 40%.
29 Rachel Clacher: Moneypenny
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2007 2008 2009 2010 2011
–
150
200
250
100
50
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
800
1,000
1,200
1,400
600
400
200
The unsung heroes of business: Entrepreneurs and their total tax contribution 30
Rob Hamilton
Instant Of?ces
‘In the ?rst year or two, you think you’re going to go bust every other day.’
Rob Hamilton launched Instant Ofces when he was just 24 years old. His
choice of industry was a no-brainer – he was in possession of a degree in
commercial real estate and had spotted a gap in the market for serviced
ofces that you could book online. He had no savings so decided to fund
his start-up using credit: ‘I borrowed about £10,000 on a few credit cards,’
he says. ‘Luckily I was in pro?t by the end of the ?rst year or I could have
ended up in real trouble.’
Hamilton was lucky, it’s true, but also determined and ambitious;
traits that are the hallmark of many entrepreneurs. It was this dogged
resolve that kept him going through the tough start-up phase. ‘In the ?rst
year or two, you think you’re going to go bust every other day,’ he admits.
‘But once you get beyond the initial curve, you never think about giving
up again.’
That was back in 1999. Over the past 13 years, Hamilton has diversi-
?ed into managed ofces, opened headquarters on the far side of the
globe in Miami and Sydney, and grown from a headcount of just one
(himself) to 100. Revenues for the current year are forecast to hit £26m
and, at Instant Ofces’ current growth rate, the business will hit a turno-
ver of £100m by 2020.
Hamilton puts his success down to his ability to be ?exible. ‘If some-
thing doesn’t work, you try something diferent,’ he says. ‘You have to
allow yourself to experiment.’ Of course, careful cash ?ow management
is also key: ‘We run cost-efectively and cheaply,’ he explains. ‘This is how
we’ve grown.’
These days, around 30% of Instant Ofces’ turnover goes to HMRC.
‘Our tax payouts are enormous,’ says Hamilton. ‘There’s national insur-
ance, business rates, VAT… Payroll is our most signi?cant outgoing with
around 20% of total costs going on people. I think that’s pretty high.’
Like many of the entrepreneurs featured in this Report, Hamilton
believes that one ?at rate of tax is the answer. ‘It should just be 30% for
the lot,’ he says. But he does feel that government has made a concession
to entrepreneurs by bringing corporation tax down to 22% by 2014. That
will make the UK’s corporation tax the fourth lowest rate in the G20 by
2015. ‘The little things do add up,’ he says. ‘As an entrepreneur, you need
to feel that your government is on your side. That helps to motivate you
when the chips are down.’
These days, around
30%
of Instant Ofces’
turnover goes to HMRC
31 Rob Hamilton: Instant Ofces
But Hamilton believes that the onus is on entrepreneurs themselves,
rather than government, to stimulate enterprise in UK Ltd. ‘There is a
limit to what government can do,’ he says. ‘You just have to be relentlessly
persistent.’
That said, Hamilton admits that if he had failed back in 1999, he
would have struggled to dust himself of and try again. ‘I haven’t been
put of because I’ve been successful,’ he explains. ‘If I hadn’t, who knows?
Because of that, I have learned to be cautious. I never put everything
on black.’
‘Our tax payouts are enormous. There’s national insurance, business rates,
VAT… Payroll is our most signi?cant outgoing with around 20% of total
costs going on people. I think that’s pretty high.’
Instant Of?ces
The total tax pro?le in 2011/2012
In the business year to 30 April 2012 Instant Ofces generated revenues
of £22.8m, pro?ts before taxes of £3.1m and paid £7.0m in taxes to the
UK government. Instant Ofces operates through two legal entities – a
partnership and a company. The pro?ts of the partnership are not taxed
through corporation tax, but through the income tax of the partners.
The tax payment discussed below includes taxes that are an expense for
the company, the partnership and the individual members in the partner-
ship (taxes borne), and those that are collected by the company and the
partnership on behalf of the UK government (taxes collected).
Dividends received by shareholders of a company will be subject
to income tax in the hands of the shareholders when the dividends are
received. The tax paid by shareholders on their dividend income is not
included in this study as it is neither borne nor collected by the company.
Business rates of £2.3m, which equals 10% of turnover, accounted for
57% of taxes borne in the 2011/12 business year.
Taxes borne 2011/2012
9%
29%
57%
2% 4%
Corporation tax
Tax on partners
Business rates
Employers’ NIC
Other
Total Tax Contribution
in the last ?ve years,
equivalent to
920
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 32
For every pound of taxes borne by the business and the partnership
members a further £0.78 is paid to government in taxes collected. The tax
borne has been split into tax borne by the business (i.e. the taxes borne by
the company and the partnership) and the tax borne by the members of
the partnership.
Taxes borne and collected 2011/2012
PAYE
Taxes Collected Taxes Borne
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Net VAT
Taxes borne by business
Taxes borne by partners
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
19.5
Taxes collected 8.7
Taxes borne by business 7.9
Taxes borne by members 2.9
Over the last ?ve years Instant Ofces has paid £19.5m in taxes borne
and collected. While the trend has generally been one of increasing
amounts of tax there was a reduction in 2010 due in part to a dip in pro?ts.
The Total Tax Contribution made by Instant Ofces has more than
trebled over the last ?ve years.
Total Tax Contribution
Taxes borne
Taxes collected
Taxes borne by partners
2008 2009 2011 2010 2012
4,000
5,000
6,000
7,000
8,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
33 Rob Hamilton: Instant Ofces
In the 2011/2012 business year the UK government received on aver-
age £13,000 in employment taxes for each of the 95 people employed
by Instant Ofces. This has increased by nearly 20% compared to
2007–2008.
In the last ?ve years Instant Ofces has increased its workforce by over
50%. Over the same period the employment taxes paid have increased
by 85%.
Total employment taxes
Taxes borne
Taxes collected
Employees
2008 2009 2011 2010 2012
800
1,000
1,200
1,400
600
400
200
–
80
90
100
70
60
50
40
30
20
10
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 34
Conclusion
In the UK today, there are an estimated 4.8 million private ?rms of which
99.9% qualify as small to medium-sized businesses (SMEs). The vast
majority of these are micro businesses with less than ?ve staf.
This report has showcased the less reported and very much smaller
population of entrepreneurs who have grown from humble beginnings to
employ close to or more than 100 staf.
In 2009 a NESTA report
2
showed there to be only 11,500 with more
than 10 staf which were also growing at more than 20% per annum over
three consecutive years. These ‘Gazelles’ accounted for just 6% of SMEs
with more than 10 staf and only 0.2% of all private businesses but be-
tween them generated half of the new jobs created by existing businesses
between 2002 and 2008.
3
We have looked at the story behind seven entrepreneurial businesses
that closely represent this valuable minority and have undertaken a study
with the help of PwC to quantify their Total Tax Contribution. From
a cross-section of industries and locations around Britain the common
theme is simply this: they are founder-led, successful, fast-growing
companies that contribute much more to the economy than is generally
reported.
Contribution to the economy and public services
Since inception, these businesses have overcome many challenges, faced
stif competition both at home and abroad, and faced a number of
?nancial hardships.
Yet, throughout it all, they have continued to innovate, to create jobs,
and to pay taxes, both directly and indirectly, to HMRC. Overall, the
entrepreneurs featured in this Report have generated a total Total Tax
Contribution of £104.2m for public ?nances over the last ?ve years and
for most companies in the study the largest elements of this are VAT and
employment taxes. In today’s terms, that amount of money could employ
4,910 nurses for a year. And this £104.2m has been created from nothing,
brought about through the tireless dedication of seven business owners
(along with their co-founders and the teams they have built around them)
that have committed their lives to building businesses, to creating ‘some-
thing meaningful,’ to quote Health Management founder, Andrew Noble.
As shown in their last ?led accounts, these companies employ a total
of 1,219 people. And, overwhelmingly, these staf are on remuneration
packages that are above the national average. All of the companies have
grown headcount year-on-year, contributing to the narrowing unemploy-
ment ?gures across the UK as a whole.
2. NESTA, October 2009 Business Growth and Innovation, The wider impact of rapidly-
growing ?rms in UK city-regions, Geof Mason, Kate Bishop and Catherine Robinson
3. NESTA, October 2009, Measuring Business Growth, High-growth ?rms and their
contribution to employment in the UK, Michael Anyadike-Danes, Karen Bonner, Mark Hart
and Colin Mason
Overall, the
entrepreneurs
featured in this
Report have
generated a total of
£104.2m for public
?nances over the
last ?ve years
35 Conclusion
How the value created is distributed
At a national level economic activity is commonly measured by the GDP.
The contribution that companies make to GDP is typically measured by
calculating the Gross Value Added. The Total Tax Contribution data
collected by PwC, when added to UK pro?t after tax, wages and salaries
(net of employment taxes) and net interest to ?nance the business, can be
used to approximate Gross Value Added. This shows that of the Gross
Value Added, on average over the last ?ve years and across our companies,
44% was distributed to employees, (with a range from 29% to 62%). As
most of these companies have avoided taking on any signi?cant debt, the
interest costs have been negligible. The amount retained or distributed to
owners is also relatively low; just 15% on average, while the value distrib-
uted to government in taxes borne and collected on average amounts to
41% of the total (with a range from 21% to 64%).
Value distributed by the businesses in the study
44%
41%
15%
Wages and salaries net of
employment taxes (employees)
Taxes borne and collected
(Government)
Pro?t after tax (shareholders/
reinvested)
Entrepreneurs vary in their views on what government should do to
amend tax legislation but one thing is clear: the founders of high growth
businesses like those pro?led in this report make a big overall contribution
to UK plc. We should do all that we can to applaud and encourage them
to keep doing what they, and so few others are able to do so well.
Author
Duncan Cheatle, CEO Prelude Group, co-founder StartUp Britain
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining speci?c professional advice. No representation or warranty (ex-
press or implied) is given as to the accuracy or completeness of the information contained in
this publication, and, to the extent permitted by law, the authors and distributors do not accept
or assume any liability, responsibility or duty of care for any consequences of you or anyone
else acting, or refraining to act, in reliance on the information contained in this publication or
for any decision based on it.
Copyright 2012. All rights reserved.
In this document, “PwC” refers to the UK member ?rm, and may sometimes refer to the PwC
network. Each member ?rm is a separate legal entity. Please see www.pwc.com/structure for
further details.
Using the PwC Total Tax Contribution framework, this study
shows that successful entrepreneurial companies make a
signi?cant tax contribution to the public ?nances in the UK.
They have also made a wider economic contribution as they
have continued to grow through the recession. It is easy
to forget that our entrepreneurs are hard-working people
from diverse backgrounds who have risked failure and made
sacri?ces to pursue their ideas. We must remember that they
create jobs and wealth for their workers and they contribute
to the public purse. We need to celebrate their success as it
brings bene?ts to all.
Ruby Parmar, Partner at PwC
doc_157900025.pdf
File with regards to the unsung heroes of business entrepreneurs and their total tax contribution.
Entrepreneurs and their
total tax contribution
The unsung
heroes of
business
NOVEMBER 2012
Prelude in
association with
Contents
About the report: Tax & UK enterprise 3
Foreword from Ruby Parmar 4
About the methodology 5
Alex Cheatle – Ten Group 6
Andrew Noble – Health Management Limited 10
Hugh Robertson – RPM 14
Jonathan Quin – World First 18
Paul Wedgwood – Splash Damage 22
Rachel Clacher – Moneypenny 26
Rob Hamilton – Instant Of?ces 30
Conclusion 34
Prelude in
association with
About Prelude
Prelude creates and delivers programmes, events and initiatives with a
single purpose in mind: to help make Britain the most enterprising nation
in the world.
Prelude has worked with and supported over 1,000 of Britain’s most
experienced entrepreneurs. We provide support and a championing voice
for the fast-growing, job-creating businesses that the economy needs
so badly.
At the forefront of what we do is The Supper Club, home to a few
hundred of Britain’s most successful entrepreneurs from across all sectors.
It is our members’ experiences that shape the best practice we share with
those looking to emulate their success.
We have been described as ‘a Do Tank, not a Think Tank’. We like that
– ideas are two-a-penny. As any entrepreneur knows, it’s the execution of
an idea that counts! We help with that execution.
For more, visit www.preludegroup.co.uk
3 About the report
About the report:
Tax & UK enterprise
After enduring the longest recession in living memory, the UK economy
is now ?nally edging towards recovery, with GDP growing 1% in the last
quarter. Unemployment has been steadily decreasing but there is still a long
way to go. An upturn in the UK services industry is heartening, but the
manufacturing sector continues to struggle and bank lending is still failing
to reach the majority of cash-strapped businesses, despite various initiatives
launched by government. The UK’s economic recovery relies chie?y on
growth from the private sector, rather than economic lever-pulling within
government. In short, it is business rather than the state that is tasked with
creating jobs and driving the UK towards a more prosperous era.
While those in government may embrace the idea that entrepreneurial-
ism is fundamental to the future prospects of the country – witness, for
instance, the Prime Minister’s latest call for an ‘aspiration nation’ at the
Conservative party conference this is not necessarily a narrative that the
general public ?nds particularly compelling.
The recent media and parliamentary debates around whether busi-
nesses are paying the right amount of corporation tax may be partly to
blame for people’s antipathy towards business in general. These debates
however often ignore sizeable contributions that business makes to the
UK. In particular, the contribution of the relatively small number of
entrepreneurs who set up and grow medium-sized businesses from scratch
is often overlooked. This group of just thousands not only enrich the UK’s
innovation landscape through the services they provide and the products
they produce, they also create many of the new jobs as well as contribute
new sources of tax receipts for the UK Treasury. Yet their input is seldom
acknowledged by people beyond the con?nes of government and tradi-
tional business circles.
The result is the perpetuated myth that successful business owners are
the sole and sel?sh bene?ciaries of the fruits of their business’s output.
The British Chambers of Commerce have attempted to address this lack
of awareness through their ‘Business is Good for Britain’ campaign, but
more needs to be done to change the tone of the debate. The key mes-
sage of this report is that we need to do all that we can to encourage and
support the relatively small cohort of business innovators who drive value
into our economy and make such a signi?cant and mostly overlooked
contribution to public ?nances in the UK.
The report is meant only to provoke thought. It does this by drawing
on a handful of real-life experiences and by analysing the tax accounts
of those entrepreneurs who have kindly opened their books to PwC for
analysis.
Authors
Duncan Cheatle, CEO Prelude Group, co-founder StartUp Britain
Rebecca Burn-Callander, web editor Management Today
The unsung heroes of business: Entrepreneurs and their total tax contribution 4
Foreword from Ruby Parmar
Partner and Head of Private Business at PwC
The unrecognised heroes of British business
In many respects entrepreneurs have become the unrecognised heroes of
British business. Traditionally entrepreneurs are dynamic, creative and
risk-taking individuals who use innovation to create wealth in even the
hardest of economic climates, and this is borne out by the seven entrepre-
neurs who have taken part in this study.
In particular, this study quanti?es the signi?cant contribution that
successful entrepreneurial companies make to the public ?nances in the
UK through the taxes they pay and collect. It also highlights the wider
economic contribution made by these businesses as they have continued
to grow through the recession. Even where pro?ts have stalled, these ?rms
have continued to grow their workforce with the expectation that they will
get through the downturn.
One view that we see expressed by the public and in the media is that
entrepreneurs are in business purely for their own interests. This view
has often confused me, as it lacks all understanding of what it is to be an
entrepreneur and their valuable place in society. As the interviews in this
report show, it is not easy to build a successful business from scratch.
Most of the businesses in this report started as one or two individuals
with a great idea. Some of them started from home (where 60% of all
small businesses start), some were fortunate enough to have access to
business premises, one started from a cow-shed and another began with
little more than a telephone and a phone book. However and wherever
they began, these businesses have become successful largely due to the
hard work and persistence of the people who founded them.
The stories in the report show how taking risks and using initiative
can generate wealth, jobs and large amounts of tax revenue. Whether it’s
making currency exchanges quicker and easier, providing trusted out-
sourced PA services or creating cutting edge video games, the ability to be
agile and to respond to change in order to exploit opportunities with new
products and services, is a common theme.
The personal and ?nancial sacri?ces taken by entrepreneurs,
particularly in the early years, should not be underestimated. One
entrepreneur sold everything he had to raise start-up capital; another
funded his business entirely from credit cards. Happily these risks paid
of, but many entrepreneurs will sufer several setbacks before building a
successful business.
All of the entrepreneurs in this study have created jobs and wealth for
workers. They have bene?ted their local economies and the wider UK
economy by paying increasing amounts of tax to the UK Exchequer. These
case studies show how vital it is that the contribution made by entrepre-
neurs is recognised and that they are encouraged to keep taking risks and
to grow their businesses. A business that is started today by one person
in a spare room with a great idea and a bank overdraft, could soon be
employing many people and generating millions of pounds in tax revenue.
5 About the methodology
About the methodology
This report uses data provided by the participating businesses on their
signi?cant UK tax payments. It uses the PwC Total Tax Contribution
methodology which looks at all the diferent taxes that businesses pay and
administer, including employment taxes, VAT and other taxes as well as
corporation tax.
The tax payments are split into taxes borne and taxes collected. Taxes
borne are those taxes that are a cost to a business and afect its results.
Taxes collected are taxes that, while generated by a business’s operation,
do not directly afect its results, but which are administered on behalf of
the UK Government.
The businesses provided details of tax payments for at least the ?ve
most recent business years for which data was available. As the businesses
have diferent ?nancial year-ends, there is some variation in the precise
time period covered by each business. In addition some were able to
provide data for more than ?ve years.
1
The study does not include the tax paid by the owners of the busi-
nesses on the dividends that they may receive from the business. This
is because the tax due will be afected by whether or not dividends are
declared and the personal circumstances of the individuals. The results
do include the tax withheld by businesses on any payments of salary to
owners who are also employed by their business.
The results do include the tax paid by partners in respect of the pro?ts
made by the partnership in which they hold a share. This is because
partnerships do not pay corporation tax. The partners pay income tax
based on the partnership’s pro?t as, for tax purposes, the partners and the
partnership are viewed as a single entity. The only business in the study
that operates, in part, through a partnership is Instant Ofces.
To illustrate what the total tax borne and collected (in the last ?ve
years) equates to in terms of contribution to public services we have
applied a consistent measure of how many newly-quali?ed Band 5 nurses
this would pay for for one year. That ?gure was sourced from the NHS
website.
1. While PwC has analysed the data received from the businesses to produce the study
results, it has not veri?ed, validated or audited the data and cannot give any undertaking as to
the accuracy of the study results.
The unsung heroes of business: Entrepreneurs and their total tax contribution 6
Alex Cheatle
Ten Group
‘I didn’t pay myself for the ?rst 18 months and built up debts to pay other
people’s wages. I was basically surviving on bread and water.’
Alex Cheatle is the boss of lifestyle management ?rm Ten Group. He
launched the business from a spare room in 1998 with Andrew Long.
‘I sold everything I owned to start the business,’ he recalls. ‘I didn’t pay
myself for the ?rst 18 months and built up debts to pay other people’s
wages. In fact, I went backwards quite savagely in the net worth stakes. I
was basically surviving on bread and water.’
But Cheatle’s hard work and sacri?ce paid of, and over the past 14
years Ten has grown into an international, 350-employee strong business
turning over £20m a year. Clients – or members, to use Ten terminology
– use them for everything from booking concert tickets to ?nding a good
local plumber.
As Ten’s revenues have grown, so has its tax bill. ‘Pay us £120, and £20
goes to HMRC as VAT,’ Cheatle explains. ‘Then we have to spend £55 on
salaries, of which around £14 is funnelled out through income tax and
national insurance. So, before other taxes like corporation tax have even
kicked in, £34 of the £120 has gone to the taxman.’
But Cheatle is pragmatic about the UK tax regime. ‘I don’t have any-
thing against paying tax,’ he says. ‘Like most entrepreneurs, I am obsessed
with creating really high quality products and services, building a team; I
am not obsessed with reducing the rate of corporation tax.’
Is government doing enough to ensure that small ?rms are encouraged
and incentivised by the UK tax regime, rather than penalised? Cheatle
pauses. ‘What UK entrepreneurs need are clearer rules and lower levels of
tax on genuinely entrepreneurial ventures,’ he says. ‘There are a few things
that government is doing right, like the Enterprise Investment Scheme and
R&D tax credits, but otherwise there should be a ?at, competitive rate for
all small businesses.’
Indeed, it seems fair that entrepreneurs – as the risk-takers and grafters
of the enterprise world – should receive some support in return for their
services to the UK economy. Nearly half of the UK’s GDP is generated by
small ?rms after all. Over the last ?ve years in business, Ten Group has
generated £16.7m for Her Majesty’s Revenue. By continually reinvesting
into his business, Cheatle is ensuring that his concierge service will keep
on generating tax receipts for the taxman long into the future.
And while long-term rewards may await the successful entrepreneur,
in the short term, running a business is a serious undertaking, and
As an entrepreneur,
your job is to take
the biggest risks in
the business and
to put yourself on
the line more than
anyone else
7 Alex Cheatle: Ten Group
entrepreneurs are under the constant threat of ?nancial ruin. ‘As an
entrepreneur, your job is to take the biggest risks in the business and to
put yourself on the line more than anyone else,’ explains Cheatle. ‘You are
always the last person to get paid and the ?rst to put your hand in your
pocket in times of trouble.’
So how can government convince more people to start up businesses
and contribute to UK plc? ‘For the most part it should do nothing,’ says
Cheatle. ‘I’m not a big fan of government trying to pick winners. But,
as entrepreneurs are the people that create the jobs, the wealth, and the
innovations of tomorrow, our tax system should re?ect that.’
‘There are a few things that government is doing right, like the Enterprise
Investment Scheme and R&D tax credits, but otherwise there should be a
?at, competitive rate for all small businesses.’
Ten Group
The total tax pro?le in 2010/2011
In its business year to 31 August 2011 Ten Group generated revenues of
£20.1m, pro?ts of £0.7m and paid £5.2m in taxes to the UK government.
In the year 2010/2011 corporation tax was less than 10% of the taxes
borne by Ten Group, with 83% (£893,000) relating to employers’ national
insurance contributions.
Taxes borne 2010/2011
6%
11%
83%
Corporation tax
Business rates
Employers’ NIC
For every pound of taxes borne by the company a further £3.89 is paid
to government in taxes collected.
In 2011, Ten Group paid over £2m in VAT to HMRC on the fees
received from its members. The VAT payment is made up of VAT received
from members’ fees, less the VAT incurred on the Group’s purchases.
Total Tax Contribution
in the last ?ve years,
equivalent to
789
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 8
Taxes borne and collected 2010/2011
Net VAT
PAYE and employee NIC
Total taxes borne
Taxes Collected Taxes Borne
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
16.7
Taxes collected 12.8
Taxes borne 3.9
Over the last ?ve years Ten Group has paid £16.7m in taxes borne
and collected. In 2011, Ten Group paid UK corporation tax for the ?rst
time. In earlier years Ten Group made tax losses or used tax losses from
earlier years to reduce its corporation tax bill, nevertheless the pro?le of
the taxes paid by Ten Group has been consistent over the period and has
shown strong growth throughout.
Total Tax Contribution
Taxes borne
Taxes collected
2005 2004 2006 2007 2009 2008 2010 2011
4,000
5,000
6,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
Ten Group is a people intensive business and so it is no surprise that
the biggest element of its Total Tax Contribution is taxes on employment
such as social security contributions and personal income tax withheld
from employees’ salaries.
9 Alex Cheatle: Ten Group
At the end of August 2011, Ten Group was employing 274 workers.
Each of these jobs generated £10,400 on average in 2011 in terms of
employment taxes and national insurance contributions. Despite the
global economic crisis, Ten Group has tripled its number of employees
in the last ?ve years with a similar increase in the amount of employment
taxes borne and collected.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2005 2004 2007 2008 2009 2010 2011
2,000
2,500
3,000
1,500
1,000
500
–
200
250
300
150
100
50
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 10
Andrew Noble
Health Management
Limited
‘The ?nancial reward is not a motivator at all. It’s about having independ-
ence and creating something meaningful.’
Entrepreneurial ventures can spring from the most unlikely places.
‘We started our business in 2002 out of a basement on Lots Road,’
laughs Andrew Noble, boss of occupational health consultancy Health
Management. ‘I had to borrow a desk from a friend. I started with liter-
ally a telephone and a phone book. That was it.’
But despite Health Management’s modest start in life the business
?ourished, turning over £100,000 in its ?rst year. It was a dream come true
for ?rst-time entrepreneur Noble. ‘I’d wanted to start my own business
since I was at school,’ he says. It had taken rather longer than Noble had
anticipated, however. ‘I went into the City. It was only supposed to be for
a short while but it turned into 10 years. I worked in corporate ?nance and
it only made me more desperate to launch a business myself.’
The opportunity ?nally arose when Noble was approached by a friend,
Dr Alasdair Emslie. Emslie and his brother Richard had previously run a
similar healthcare business. ‘It just felt right,’ says Noble.
The concept may have been perfect but the timing could have been
better. Noble was a newly-wed when he quit his job and started Health
Management, fresh back from his honeymoon. ‘My wife was very under-
standing,’ he says. ‘We would be working a minimum of 12 hours a day,
seven days a week. When the business was moved to Sussex, I would stay
in a B&B for two nights then go back to London.’
Noble now employs roughly 350 staf nationwide, providing advice
and hands-on care for clients ranging from SME to enterprise size. ‘We
have saved lives and prevented illnesses,’ says Noble. ‘We were even on
site at London 2012, assessing the construction workers building the
Olympic Park.’
Health Management doesn’t only help to up productivity and wellbe-
ing among its clients, it also makes a huge contribution to the wider
economy in terms of training. ‘We are the largest independent training
body of consultant occupational physicians outside the NHS,’ explains
Noble. ‘Occupational medicine is largely done in the private sector; it’s
the only branch of medicine where the NHS does not dominate.’
Not to mention the ?rm’s annual tax contribution. ‘VAT is the big-
gest tax that we collect for government,’ says Noble. ‘As consultants in
Health Management
doesn’t only help to
up productivity and
wellbeing among its
clients, it also makes
a huge contribution
to the wider
economy in terms
of training
11 Andrew Noble: Health Management Limited
occupational health, we are standard rated. We do claim some of it back
but essentially on £30m sales we are adding 20% for government. That’s
huge.
‘It is about £28,000 to government in total tax by each of our employ-
ees,’ he continues. ‘That’s adds up to over £7m a year. How much does a
new school cost? Maybe £10m? Over 10 years, Health Management could
set up seven schools!’
Indeed, Noble is very clear on his motivations for running the busi-
ness. ‘It’s never been about money,’ he says. ‘The ?nancial reward is not a
motivator at all. It’s about having independence and creating something
meaningful. If Health Management had failed I would have tried again
ten times over.’
But Noble does admit that running a business can be challenging.
‘I feel the responsibility of my staf enormously,’ he says. ‘That’s what
makes me cautious. I’m responsible for the livelihoods of hundreds of
people. Every month our payroll is about £750,000. That’s way beyond
what any of the individual directors could be responsible for. It’s an
enormous weight on our shoulders.’
That said, Noble is adamant he wouldn’t change a thing. ‘I could
never go back to an investment bank,’ he says. ‘Once you’ve experienced
the sheer excitement of creating something and building a team, you are
hooked.’
‘VAT is the biggest tax that we collect for government,’ says Noble. ‘As
specialist consultants to business, we are standard rated. We do claim
some of it back but essentially on £30m sales we are adding 20% for
government. That’s huge.’
Health Management Limited
The total tax pro?le in 2011
In 2011 Health Management Limited generated revenues of £24.7m, prof-
its before tax of £2.4m and paid £7.8m in taxes to the UK government. As
a people-intensive business with average salaries in excess of the national
average, it is not surprising that Health Management’s largest tax borne is
employer’s NIC contributions of nearly £1m in 2011. This accounted for
71% of taxes borne in 2011 with corporation tax making up only a ?fth
of taxes borne in that year.
Total Tax Contribution
in the last ?ve years,
equivalent to
1,170
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 12
Taxes borne 2011
20%
8%
71%
1%
Corporation tax
Business rates
Employers’ NIC
Other
For every pound of taxes borne by the company a further £4.64 is paid
to government in taxes collected.
VAT of £3.7m made up nearly half of the all taxes borne and collected
by Health Management Limited in 2011. The VAT payment is made up
of VAT received from customers less the VAT incurred on the company’s
purchases.
Taxes borne and collected 2011
PAYE and NIC
Taxes Collected Taxes Borne
7,000
6,000
5,000
4,000
3,000
2,000
1,000
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Net VAT
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
24.8
Taxes collected 19.0
Taxes borne 5.8
Over the last ?ve years the company has made tax payments of nearly
£25m to the UK government – more than the company’s entire turnover
in 2011.
Although Health Management Limited’s Total Tax Contribution has
grown steadily over the last ?ve years, the amount of corporation tax paid
13 Andrew Noble: Health Management Limited
has ?uctuated over the years as the company’s pro?ts have varied. In 2011
the company’s Total Tax Contribution was over three times as much as its
Total Tax Contribution in 2007.
Total Tax Contribution
Taxes borne
Taxes collected
2007 2008 2010 2009 2011
4,000
5,000
6,000
8,000
7,000
9,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
Between 2007 and 2011, the number of people employed by the
company increased by 168% to 273. In the same period, the total employ-
ment taxes borne and collected by the company had increased by 277%,
equating to £13,266 per employee in 2011.
Not only was the company employing more people in 2011 than in
2007, but on average they were each earning £4,000 a year more and the
employment taxes per employee were also almost £4,000 more per year.
Total employment taxes
2007 2008 2010 2009 2011
2,000
2,500
3,000
3,500
4,000
1,500
1,000
500
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
200
250
300
150
100
50
–
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
Taxes borne
Taxes collected
Employees
The unsung heroes of business: Entrepreneurs and their total tax contribution 14
Hugh Robertson
RPM
‘I think of myself less as an entrepreneur and more as an ethical employer.’
There’s no such thing as a typical entrepreneur. They hail from many
diferent cultural, academic and ?nancial backgrounds. Sometimes, even
the entrepreneurs themselves are surprised by the direction their careers
take. Take Hugh Robertson, founding partner of marketing agency RPM.
When he was a youngster, he was determined to be a rugby player when he
grew up – until an injury forced him of the ?eld. ‘I couldn’t play any-
more,’ he says, ‘and that was upsetting. I became rebellious and got kicked
out of school with just a few O’Levels.’
That may have been the end of Robertson’s sporting career but it was
the beginning of his entrepreneurial journey. He got a job driving trucks
for an events agency on the weekend to make a little pocket money.
‘I loved it,’ he says. ‘I ended up applying for a full-time job and never
looked back.’
It was while working at this agency that Robertson met the two future
co-founders of RPM. ‘We wanted to do things diferently and we pitched
our ideas to the board but they turned us down,’ he says. ‘So we borrowed
£5,000 and took the plunge.’
In January 1993, RMP Ltd launched out of ‘a cow shed in
Wokingham,’ recalls Robertson. The trio had no clients, very little
start-up capital, and bills to pay so they secured a £70,000 overdraft from
the bank to tide them over for those tough ?rst months. ‘We soon got a
call from the bank manager,’ remembers Robertson, ‘saying that he had
changed his mind and was calling the loan in. We had one month to turn
the business around.’
Most companies would have been driven to the wall but Robertson and
his co-founders pitched their hearts out over the next four weeks, landing
Marks & Spencer as a client. Robertson worked all hours to keep the
business on track, ‘I’m a ?rm believer in leading from the front,’ he says.
I would never ask my people to do something that I wouldn’t, so I’d drive
lorries, I’d take the weekend shifts.’
The business has now grown into a multi-discipline agency, running
all kinds of global campaigns, from pop-up events and social strategy to
employee engagement programmes for clients including Reebok, Adidas
and Diageo. Robertson bought out his other co-founders in 1998 and
2005 – ‘When we were not united we were destructive for the business,’ he
explains – and now runs the business with three partners, one of the his
brother. ‘Doing it on your own can be difcult,’ he admits.
15 Hugh Robertson: RPM
RPM employs 175 people today. People that Robertson describes as the
?rm’s most valuable asset. ‘One of the most rewarding parts of my job is
getting the best out of the people who work for me,’ he says. ‘I think of
myself less as an entrepreneur and more as an ethical employer.’
Indeed, Robertson takes his responsibilities as an employer very seri-
ously. He has scaled the company gradually, through organic growth, in
order to make sure that jobs are never at risk, nor too much strain placed
on his staf. ‘We only turn over £25m,’ he says. ‘And I’ve chosen to go for
the slow burn. It’s more important to me to build a long-term sustainable
business rather than a money-spinner.’
It seems that making millions isn’t at the top of Robertson’s priority
list: ‘Not at the expense of the business or my people,’ he says. ‘Being a
good entrepreneur sometimes means being sel?ess. Making decisions for
the greater good of the business and not yourself…’
We all need to pay taxes but the current system doesn’t always provide a
level playing ?eld in an ever more global market
RPM Limited
The total tax pro?le in 2012
In the business year ended 31 March 2012, RPM generated revenues of
£25.1m, pro?ts before tax of £1.6m, and paid £5.7m in taxes to the UK
government. Corporation tax makes up just over a third of the company’s
taxes borne (37%), with employers’ national insurance contributions
accounting for the remainder.
Taxes borne 2011/2012
37%
63%
Employers’ NIC
Corporation tax
For every pound of taxes borne by the company a further £3.70 is paid
to government in taxes collected.
VAT of £2.6m made up 46% of the all taxes borne and collected by
RPM in 2011/2012. Although VAT is a not a cost to RPM as it is paid
by the customers, it represents a bene?t to the UK Exchequer that arises
directly as a result of the activities of RPM.
We only turn over
£25m
Total Tax Contribution
in the last ?ve years,
equivalent to
850
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 16
Taxes borne and collected 2011/2012
PAYE
Employee NIC
Net VAT
Taxes Collected Taxes Borne
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
18.0
Taxes collected 14.2
Taxes borne 3.8
Over the last ?ve years the company has paid £18m in taxes borne and
collected. Overall the amount of taxes paid by RPM has grown over the
last ?ve years, though it sufered a dip in 2009 and 2010, mainly due to
reductions in taxes collected. This appears to be due to slight reductions
in revenue and staf numbers.
Total Tax Contribution
Taxes borne
Taxes collected
2008 2009 2011 2010 2012
4,000
5,000
6,000
7,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
RPM had a workforce of some 185 people at the end of March 2012.
Each of these jobs generated on average £14,100 in taxes and national
insurance contributions in the year to 31 March 2012. The amount of
employment taxes can be seen to generally correlate to the number of
employees. An increase in staf during 2011/2012 was only fully re?ected
in the taxes paid in 2012. Over the last ?ve years the number of staf has
increased by 85% and the employment taxes by nearly 80%.
17 Hugh Robertson: RPM
Total employment taxes
Taxes borne
Taxes collected
Employees
2008 2009 2011 2010 2012
2,000
2,500
3,000
1,500
1,000
500
–
80
180
160
140
120
100
200
60
40
20
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 18
Jonathan Quin
World First
‘There’s a sign on the M3 as I’m driving to work saying, ‘It costs £1m to
run a wing of this hospital for a year’. When you think about it that way, I
honestly don’t mind paying tax.’
Less than a decade ago, if you wanted to send money overseas you had
to go into a bank with two forms of identi?cation and the money would
take ?ve days to transfer. Today, the process is far less arduous. Jonathan
Quin, co-founder of foreign exchange ?rm World First, is one of the
entrepreneurs building the technology to allow these transactions to take
place almost instantly. World First even recently broke the world record
for fastest payment, completing a currency transfer in just six minutes.
Quin founded World First with Nick Robertson in January 2004. The
pair met at Citibank in the mid-nineties and both were frustrated that
while large companies received great exchange rates from the banks,
smaller businesses were usually ofered far poorer deals. ‘We saw an
opportunity there,’ says Quin. ‘Not only were companies outside the
FTSE 250 getting worse currency pricing, they were also getting terrible
customer service.’
The pair remained in the banking industry for 18 months after their
‘eureka moment’ to save money to launch the new venture: ‘I wanted to
start our new business without any debt,’ explains Quin. And World First
has indeed been debt-free since inception, serving private individuals and
companies alike, growing organically to become an international business
with ofces in Asia and the US, bringing much-needed revenue into the UK.
The cornerstone of World First’s success is its commitment to cus-
tomer service. This goes beyond the usual ‘answer the phone within three
rings’ too. Bonuses for staf manning the phones are based on feedback
from customers and the company prides itself on employing ‘charming’
and ‘efcient’ people. World First must be doing something right; the ?rm
boasts incredibly high account retention rates, as well as adding 30% new
customers every year. ‘We don’t focus on customer service just because
it’s good for business,’ says Quin. ‘I want to treat people like I want to be
treated. I genuinely want to improve the industry.’
World First currently employs 140 staf, up from 110 last year. ‘It’s been
a straight line up in terms of headcount,’ said Quin. ‘And I really like that
some of the staf that joined World First as their ?rst job at the start are
still with us today.’
But running a global, fast-growing business is not without its chal-
lenges. ‘It is slightly stressful that we have overheads of £1.1m every
The cornerstone of
World First’s success
is its commitment to
customer service
19 Jonathan Quin: World First
month that we have to pay whether we make money or not,’ says Quin.
Tax is, of course, a large part of this overhead. ‘It would have been better
if government hadn’t put up national insurance,’ he says. ‘I would rather
have kept that the same and not reduced corporation tax, because that
comes out after everything else.
‘Still, we’ll pay £2m this year in corporation tax alone,’ he explains.
‘But I think of it as a donation to the world. There’s a sign on the M3 as
I’m driving to work saying, ‘It costs £1m to run a wing of this hospital
for a year’. When you think about it that way, I honestly don’t mind
paying tax.’
As a technology-forward, highly cash generative ?rm, World First gets
a lot of attention from private equity companies. But Quin isn’t quite
ready to hand over the reins. ‘I’ve always wanted to be an entrepreneur,’ he
says. ‘I started my ?rst business – selling personalised number plates – at
16 years old and I promised myself that one day I would work for myself.’
Indeed, Quin can’t ever imagine retiring. He wants to keep giving back
to the enterprise ecosystem as long as he can. ‘I don’t like golf,’ he laughs.
‘And I’m just so grateful that I’m not still a banker. I want to keep running
this business as long as I can – it is a joy.’
‘It would have been better if government hadn’t put up national insur-
ance. I would rather have kept that the same and not reduced corporation
tax, because that comes out after everything else’
World First
The total tax pro?le in 2011/2012
In the year to 31 January 2012 World First generated gross pro?ts of
£15.1m, pro?t before tax of £4.5 million, and paid £3.6m in taxes to the
UK government. Corporation tax makes up over half of the taxes borne
by the company (51%), followed by employer’s national insurance contri-
butions (26%) and irrecoverable VAT (18%).
Taxes borne 2011/2012
4%
51%
26%
18%
1%
Corporation tax
Business rates
Employers’ NIC
Employment taxes
Irrecoverable VAT
For every pound of taxes borne by the company a further £0.68 is paid
to government in taxes collected.
Total Tax Contribution
in the last ?ve years,
equivalent to
472
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 20
World First facilitates foreign currency transactions for its custom-
ers and it cannot charge VAT on these transactions. It therefore cannot
reclaim the VAT on its purchases and this irrecoverable VAT thus becomes
a cost to the company and is a tax borne. For non-?nancial sector com-
panies VAT is a tax collected as it is charged to customers and reclaimed
on the company’s own purchases. In the 2011/2012 business year, the
company paid £397,000 in irrecoverable VAT.
Taxes borne and collected 2011/2012
PAYE
Employee NIC
Taxes Collected Taxes Borne
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
10.0
Taxes collected 3.8
Taxes borne 6.2
Over the last ?ve years the company has paid £10m in taxes borne and
collected. The pro?le of the taxes paid by World First is consistent and
shows strong growth throughout for both taxes borne and taxes collected.
Total Tax Contribution
Taxes borne
Taxes collected
2006 2005 2007 2008 2010 2009 2011 2012
2,500
3,500
4,000
1,500
2,000
3,000
1,000
500
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
21 Jonathan Quin: World First
By the end of January 2012 World First had a workforce of 110. Each
of these jobs generated on average £18,800 in taxes and national insur-
ance contributions in the year to 31 January 2012.
Over the last ?ve years the work force has increased from 40 to 110,
which is nearly a threefold increase. In the company’s 2011/2012 ?nancial
year the employment taxes paid were more than ?ve and a half times the
amount paid in the 2007/2008 year.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2007 2008 2009 2011 2010 2012
2,000
2,500
1,500
1,000
500
–
80
100
120
60
40
20
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 22
Paul Wedgwood
Splash Damage
‘I put everything in and there was no way back.’
The videogame industry has undergone many changes over the past
decade. Once dominated by giants like Sony and Ubisoft, there is now
a raft of new, independent developers creating games for consoles and
online audiences alike. This trend has both increased the choice for
consumers, and given rise to an era of innovation, both within the games
themselves, and in terms of new business models.
Paul Wedgwood is one entrepreneur riding this wave of innovation. He
founded games developer Splash Damage in the summer of 2001, and the
Kent-based studio now develops games for the Playstation, PC, Xbox 360
and creates multi-player games for the web. The studio boasts 2.5 million
players to date and has won over 300 awards including one BAFTA.
Most signi?cant, from an economic point of view, is Splash Damage’s
business model. It is one of a handful of UK companies that makes its
revenue exclusively from exports: while its titles are played all around the
world, its clients are all based in the US. ‘We’re fantastic for the economy,’
says Wedgwood.
All this has been achieved with no external debt. ‘We’ve never had
corporate ?nance or any external investors,’ says Wedgwood. ‘I own the
whole business today and it’s valued at around £100m.’
Not that the entrepreneur had any idea how successful the business
would be when Splash Damage ?rst launched. ‘I had £25,000 saved up and
I put the whole lot into the start-up,’ he says. ‘I wasn’t aware – in those
days – of ways that I could invest in the business and reclaim any tax. I put
everything in and there was no way back.’
In the 11 years since inception, Wedgwood has scaled Splash Damage
to employ 84 full-time staf. People are a huge part of what motivates
Wedgwood in business. ‘I run Splash Damage putting people ?rst,’ he
says. ‘I’m very proud that many of our original staf are still here. I have
given them 12.5% of the ?rm in share options so they will bene?t if we
ever sell the business.’ Wedgwood has no immediate plans to exit but adds
that Capital Gains Tax is no barrier to a sale: ‘Entrepreneurs Relief is
generous and reasonable,’ he says.
‘We only ever lose staf to the US,’ he continues. ‘We’ve never made
staf redundant, which is rare in this industry.’ Employing a large work-
force also involves a substantial tax contribution: ‘We pay over £1m in
PAYE, NIC and corporation tax each year,’ says Wedgwood.
In the 11 years since
inception, Wedgwood
has scaled Splash
Damage to employ
84
full-time staf
23 Paul Wedgwood: Splash Damage
Wedgwood’s story is one of rags to riches. ‘I grew up on a South
London council estate and left school at 15,’ explains Wedgwood. ‘I man-
aged to get a job on the Tottenham Court Road at 16, selling PCs. That
was right at the beginning – I sold ?oppy discs to the likes of Stephen
Fry and Bill Oddie.’ His later career spanned investment banking and
even a stint in Downing Street but Wedgwood always knew his future lay
in technology. He feels incredibly lucky to be running a business in an
industry he loves. ‘I pay people to make video games,’ he says. ‘It’s the
most incredible job.’
‘Entrepreneurs Relief is generous and reasonable.’
Splash Damage
The total tax pro?le in 2010/2011
At 70%, employers’ national insurance contributions were by far the big-
gest element of the taxes borne by the company in the year to 31 March
2011. Corporation tax accounts for only just over a ?fth of taxes borne.
Taxes borne 2010/2011
21%
10%
70%
Corporation tax
Business rates
Employers’ NIC
For every pound of taxes borne by the company in its 2010/2011
?nancial year a further £1.30 is paid to government in taxes collected.
The taxes collected relate to personal income tax and employees’
national insurance contributions that the company withholds from
employees’ salaries. Splash Damage does not have to charge VAT on the
sales to the majority of its customers as they are based in the US. It does
however have to pay VAT on the goods and services that it buys, but it is
allowed to reclaim this VAT. The company therefore has a net VAT refund,
rather than a net VAT payment. As the VAT refund is a repayment of
tax already paid on its purchases, it is not included in the taxes collected
?gures. In 2011 the VAT refund was £155,000.
Total Tax Contribution
in the last ?ve years,
equivalent to
170
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 24
Taxes borne and collected 2010/2011
PAYE
Employee NIC
Total taxes borne
Taxes Collected Taxes Borne
700
600
500
400
300
200
100
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
3.6
Taxes collected 2.1
Taxes borne 1.5
Over the last ?ve years the company has paid £3.6m in taxes borne and
collected. The pro?le of taxes collected has been consistent over the last
eight years showing a year-on-year increase. Taxes borne however dipped
signi?cantly in 2010 as the company paid no corporation tax in that year.
This was due to much lower pro?ts in that year, but also the company
received a signi?cant refund of corporation tax for earlier years due to the
?nalisation of relief for research and development activities.
Total Tax Contribution
Taxes borne
Taxes collected
2005 2004 2006 2007 2009 2008 2010 2011
1,000
800
600
400
200
1,200
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
By far the largest amounts of tax paid by Splash Damage relate to
taxes on employment. At the end of March 2011 the company employed
62 people (this has since risen to 84). Each of these jobs generated
25 Paul Wedgwood: Splash Damage
£15,400 on average in employment taxes and national insurance contri-
butions in 2011.
Over the last ?ve years Splash Damage has doubled its number of
employees, but the total amount of employment taxes paid has increased
by nearly 175%. The increase in taxes re?ects not only the increase in staf
numbers, but also increase in average salaries. The average employment
taxes per employee have increased by just over 30% in the last ?ve years.
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2005 2004 2007 2008 2009 2010 2011
800
1,000
1,200
600
400
200
–
50
60
70
40
30
20
10
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 26
Rachel Clacher
Moneypenny
‘Once you reconcile yourself to the possibility of failure, you have the
freedom to achieve exciting things.’
Start-ups are often launched with the aim of solving a problem or ?lling
a gap in the market. This was certainly the case with outsourced PA and
answering service, Moneypenny. Indeed, founders Rachel Clacher and her
brother Ed were both already running successful businesses when their
‘eureka’ moment struck.
Ed was the owner and sole employee of a graphics business and was
struggling to juggle customer service alongside labour. He took on a
telephone answering service to free up some of his time. However, when a
big client called in to place a large order and the telephone operative said,
‘What do you expect me to do? I’m just a telephone ordering service!’ it
became clear that the solution has shortcomings.
‘Ed lost the order,’ recalls Clacher. ‘We decided there was a genuine
need for an outsourced PA and answering service that you could trust as
though it was your own team.’
The business was launched in 2000. ‘We set up in a spare area in my
husband’s ofce,’ says Clacher. ‘We tried to make it look grown up by
painting the walls and putting in nylon carpets but we had very little
money.’ The business grew organically from there. ‘We worked 100
hours a week,’ says Clacher. ‘It’s all a bit of a fantastic blur now.’ As
Moneypenny took on its ?rst clients and they paid their invoices, Clacher
would hire new PAs. ‘We’ve never borrowed a penny from anybody,’
she says. Moneypenny has also never received any form of government
grant: ‘We get R&D tax credits but otherwise there’s not much help,’
says Clacher.
Despite operating on a tight budget, Moneypenny was highly in-
novative from the outset. Its back-end has been built in-house from the
ground up and now comprises a highly complex system that can convert
voice calls to text, divert clients to their bespoke PAs and manage all the
company’s data. ‘Only large multi-nationals have this kind of technology,’
says Clacher.
The technology is not currently licensed out to other businesses but
it is a possible revenue stream. ‘The interesting thing about what we are
doing is that while most technology drives people apart, we are trying
to use it to create stronger relationships,’ explains Clacher. ‘To help
you get through to a real person, or speak to someone who understands
your needs.’
Despite operating
on a tight budget,
Moneypenny was
highly innovative
from the outset
27 Rachel Clacher: Moneypenny
Moneypenny also makes a huge contribution in the local community.
Based in Wrexham near Chester, the ?rm hasn’t advertised for a PA or
reception role for 10 years. ‘Over 900 people applied to work for us last
year,’ says Clacher. ‘We are committed to the area and proud to invest
in the local area. Every two years we apply to the Sunday Times Best
Companies to Work For. We came 11
th
last year, and we were the only
telephone service to feature in the list.’
Clacher is hugely proud of the diference her ?rm has made in the
community, and of all the business it has achieved since inception.
But Clacher also enjoys the thrill of building a business, of being her
own boss. ‘When you are an entrepreneur, you are master of your destiny,’
she explains. ‘Both Ed and I have always been prepared to take risks. Once
you reconcile yourself to the possibility of failure, you have the freedom
to achieve exciting things’.
‘We get R&D tax credits but otherwise there’s not much help.’
Moneypenny
The total tax pro?le in 2011
Corporation tax made up a little less than half of the taxes borne by the
company (46%) in 2011. Employers’ national insurance contributions
account for a further 42%, and business rates 10%.
Taxes borne 2011
46%
10%
42%
2%
Corporation tax
Business rates
Employers’ NIC
Other
For every pound of taxes borne by the company a further £2.60 is paid
to government in taxes collected.
VAT of £1.4m made up nearly half of all taxes borne and collected by
Moneypenny in 2011. VAT is not a cost to Moneypenny as it is paid by the
customers, but it nevertheless represents a bene?t to the UK Exchequer
that arises directly as a result of the activities of Moneypenny.
Total Tax Contribution
in the last ?ve years,
equivalent to
538
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 28
Taxes borne and collected 2011
PAYE
Employee NIC
Net VAT
Taxes Collected Taxes Borne
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Total taxes borne
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
11.4
Taxes collected 8.5
Taxes borne 2.9
Over the last ?ve years the company has paid £11.4m in taxes borne
and collected. The pro?le of the taxes paid by Moneypenny has been
consistent over the period and has shown steady growth throughout.
Total Tax Contribution
Taxes borne
Taxes collected
2006 2007 2008 2009 2010 2011
2,500
3,000
3,500
2,000
1,500
1,000
500
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
A key way in which the company contributes to the economy is
through employment. Moneypenny currently employs some 220 workers.
Each of these jobs generated £5,600 on average in taxes and national
insurance contributions in 2011.
Over the past ?ve years, Moneypenny has doubled its number of
employees against a background of economic turmoil and increasing
unemployment in the UK as a whole. In the same period, the employment
taxes that it pays to HMRC have increased by nearly 40%.
29 Rachel Clacher: Moneypenny
Total employment taxes
Taxes borne
Taxes collected
Employees
2006 2007 2008 2009 2010 2011
–
150
200
250
100
50
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
800
1,000
1,200
1,400
600
400
200
The unsung heroes of business: Entrepreneurs and their total tax contribution 30
Rob Hamilton
Instant Of?ces
‘In the ?rst year or two, you think you’re going to go bust every other day.’
Rob Hamilton launched Instant Ofces when he was just 24 years old. His
choice of industry was a no-brainer – he was in possession of a degree in
commercial real estate and had spotted a gap in the market for serviced
ofces that you could book online. He had no savings so decided to fund
his start-up using credit: ‘I borrowed about £10,000 on a few credit cards,’
he says. ‘Luckily I was in pro?t by the end of the ?rst year or I could have
ended up in real trouble.’
Hamilton was lucky, it’s true, but also determined and ambitious;
traits that are the hallmark of many entrepreneurs. It was this dogged
resolve that kept him going through the tough start-up phase. ‘In the ?rst
year or two, you think you’re going to go bust every other day,’ he admits.
‘But once you get beyond the initial curve, you never think about giving
up again.’
That was back in 1999. Over the past 13 years, Hamilton has diversi-
?ed into managed ofces, opened headquarters on the far side of the
globe in Miami and Sydney, and grown from a headcount of just one
(himself) to 100. Revenues for the current year are forecast to hit £26m
and, at Instant Ofces’ current growth rate, the business will hit a turno-
ver of £100m by 2020.
Hamilton puts his success down to his ability to be ?exible. ‘If some-
thing doesn’t work, you try something diferent,’ he says. ‘You have to
allow yourself to experiment.’ Of course, careful cash ?ow management
is also key: ‘We run cost-efectively and cheaply,’ he explains. ‘This is how
we’ve grown.’
These days, around 30% of Instant Ofces’ turnover goes to HMRC.
‘Our tax payouts are enormous,’ says Hamilton. ‘There’s national insur-
ance, business rates, VAT… Payroll is our most signi?cant outgoing with
around 20% of total costs going on people. I think that’s pretty high.’
Like many of the entrepreneurs featured in this Report, Hamilton
believes that one ?at rate of tax is the answer. ‘It should just be 30% for
the lot,’ he says. But he does feel that government has made a concession
to entrepreneurs by bringing corporation tax down to 22% by 2014. That
will make the UK’s corporation tax the fourth lowest rate in the G20 by
2015. ‘The little things do add up,’ he says. ‘As an entrepreneur, you need
to feel that your government is on your side. That helps to motivate you
when the chips are down.’
These days, around
30%
of Instant Ofces’
turnover goes to HMRC
31 Rob Hamilton: Instant Ofces
But Hamilton believes that the onus is on entrepreneurs themselves,
rather than government, to stimulate enterprise in UK Ltd. ‘There is a
limit to what government can do,’ he says. ‘You just have to be relentlessly
persistent.’
That said, Hamilton admits that if he had failed back in 1999, he
would have struggled to dust himself of and try again. ‘I haven’t been
put of because I’ve been successful,’ he explains. ‘If I hadn’t, who knows?
Because of that, I have learned to be cautious. I never put everything
on black.’
‘Our tax payouts are enormous. There’s national insurance, business rates,
VAT… Payroll is our most signi?cant outgoing with around 20% of total
costs going on people. I think that’s pretty high.’
Instant Of?ces
The total tax pro?le in 2011/2012
In the business year to 30 April 2012 Instant Ofces generated revenues
of £22.8m, pro?ts before taxes of £3.1m and paid £7.0m in taxes to the
UK government. Instant Ofces operates through two legal entities – a
partnership and a company. The pro?ts of the partnership are not taxed
through corporation tax, but through the income tax of the partners.
The tax payment discussed below includes taxes that are an expense for
the company, the partnership and the individual members in the partner-
ship (taxes borne), and those that are collected by the company and the
partnership on behalf of the UK government (taxes collected).
Dividends received by shareholders of a company will be subject
to income tax in the hands of the shareholders when the dividends are
received. The tax paid by shareholders on their dividend income is not
included in this study as it is neither borne nor collected by the company.
Business rates of £2.3m, which equals 10% of turnover, accounted for
57% of taxes borne in the 2011/12 business year.
Taxes borne 2011/2012
9%
29%
57%
2% 4%
Corporation tax
Tax on partners
Business rates
Employers’ NIC
Other
Total Tax Contribution
in the last ?ve years,
equivalent to
920
nurses
The unsung heroes of business: Entrepreneurs and their total tax contribution 32
For every pound of taxes borne by the business and the partnership
members a further £0.78 is paid to government in taxes collected. The tax
borne has been split into tax borne by the business (i.e. the taxes borne by
the company and the partnership) and the tax borne by the members of
the partnership.
Taxes borne and collected 2011/2012
PAYE
Taxes Collected Taxes Borne
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
–
T
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
Net VAT
Taxes borne by business
Taxes borne by partners
The Total Tax Contribution over the last ?ve years
£ millions
Total tax paid in the last 5 business years:
of which
19.5
Taxes collected 8.7
Taxes borne by business 7.9
Taxes borne by members 2.9
Over the last ?ve years Instant Ofces has paid £19.5m in taxes borne
and collected. While the trend has generally been one of increasing
amounts of tax there was a reduction in 2010 due in part to a dip in pro?ts.
The Total Tax Contribution made by Instant Ofces has more than
trebled over the last ?ve years.
Total Tax Contribution
Taxes borne
Taxes collected
Taxes borne by partners
2008 2009 2011 2010 2012
4,000
5,000
6,000
7,000
8,000
3,000
2,000
1,000
–
T
o
t
a
l
t
a
x
c
o
n
t
r
i
b
u
t
i
o
n
(
£
0
0
0
s
)
33 Rob Hamilton: Instant Ofces
In the 2011/2012 business year the UK government received on aver-
age £13,000 in employment taxes for each of the 95 people employed
by Instant Ofces. This has increased by nearly 20% compared to
2007–2008.
In the last ?ve years Instant Ofces has increased its workforce by over
50%. Over the same period the employment taxes paid have increased
by 85%.
Total employment taxes
Taxes borne
Taxes collected
Employees
2008 2009 2011 2010 2012
800
1,000
1,200
1,400
600
400
200
–
80
90
100
70
60
50
40
30
20
10
–
E
m
p
l
o
y
m
e
n
t
t
a
x
e
s
p
a
i
d
(
£
0
0
0
s
)
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
The unsung heroes of business: Entrepreneurs and their total tax contribution 34
Conclusion
In the UK today, there are an estimated 4.8 million private ?rms of which
99.9% qualify as small to medium-sized businesses (SMEs). The vast
majority of these are micro businesses with less than ?ve staf.
This report has showcased the less reported and very much smaller
population of entrepreneurs who have grown from humble beginnings to
employ close to or more than 100 staf.
In 2009 a NESTA report
2
showed there to be only 11,500 with more
than 10 staf which were also growing at more than 20% per annum over
three consecutive years. These ‘Gazelles’ accounted for just 6% of SMEs
with more than 10 staf and only 0.2% of all private businesses but be-
tween them generated half of the new jobs created by existing businesses
between 2002 and 2008.
3
We have looked at the story behind seven entrepreneurial businesses
that closely represent this valuable minority and have undertaken a study
with the help of PwC to quantify their Total Tax Contribution. From
a cross-section of industries and locations around Britain the common
theme is simply this: they are founder-led, successful, fast-growing
companies that contribute much more to the economy than is generally
reported.
Contribution to the economy and public services
Since inception, these businesses have overcome many challenges, faced
stif competition both at home and abroad, and faced a number of
?nancial hardships.
Yet, throughout it all, they have continued to innovate, to create jobs,
and to pay taxes, both directly and indirectly, to HMRC. Overall, the
entrepreneurs featured in this Report have generated a total Total Tax
Contribution of £104.2m for public ?nances over the last ?ve years and
for most companies in the study the largest elements of this are VAT and
employment taxes. In today’s terms, that amount of money could employ
4,910 nurses for a year. And this £104.2m has been created from nothing,
brought about through the tireless dedication of seven business owners
(along with their co-founders and the teams they have built around them)
that have committed their lives to building businesses, to creating ‘some-
thing meaningful,’ to quote Health Management founder, Andrew Noble.
As shown in their last ?led accounts, these companies employ a total
of 1,219 people. And, overwhelmingly, these staf are on remuneration
packages that are above the national average. All of the companies have
grown headcount year-on-year, contributing to the narrowing unemploy-
ment ?gures across the UK as a whole.
2. NESTA, October 2009 Business Growth and Innovation, The wider impact of rapidly-
growing ?rms in UK city-regions, Geof Mason, Kate Bishop and Catherine Robinson
3. NESTA, October 2009, Measuring Business Growth, High-growth ?rms and their
contribution to employment in the UK, Michael Anyadike-Danes, Karen Bonner, Mark Hart
and Colin Mason
Overall, the
entrepreneurs
featured in this
Report have
generated a total of
£104.2m for public
?nances over the
last ?ve years
35 Conclusion
How the value created is distributed
At a national level economic activity is commonly measured by the GDP.
The contribution that companies make to GDP is typically measured by
calculating the Gross Value Added. The Total Tax Contribution data
collected by PwC, when added to UK pro?t after tax, wages and salaries
(net of employment taxes) and net interest to ?nance the business, can be
used to approximate Gross Value Added. This shows that of the Gross
Value Added, on average over the last ?ve years and across our companies,
44% was distributed to employees, (with a range from 29% to 62%). As
most of these companies have avoided taking on any signi?cant debt, the
interest costs have been negligible. The amount retained or distributed to
owners is also relatively low; just 15% on average, while the value distrib-
uted to government in taxes borne and collected on average amounts to
41% of the total (with a range from 21% to 64%).
Value distributed by the businesses in the study
44%
41%
15%
Wages and salaries net of
employment taxes (employees)
Taxes borne and collected
(Government)
Pro?t after tax (shareholders/
reinvested)
Entrepreneurs vary in their views on what government should do to
amend tax legislation but one thing is clear: the founders of high growth
businesses like those pro?led in this report make a big overall contribution
to UK plc. We should do all that we can to applaud and encourage them
to keep doing what they, and so few others are able to do so well.
Author
Duncan Cheatle, CEO Prelude Group, co-founder StartUp Britain
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining speci?c professional advice. No representation or warranty (ex-
press or implied) is given as to the accuracy or completeness of the information contained in
this publication, and, to the extent permitted by law, the authors and distributors do not accept
or assume any liability, responsibility or duty of care for any consequences of you or anyone
else acting, or refraining to act, in reliance on the information contained in this publication or
for any decision based on it.
Copyright 2012. All rights reserved.
In this document, “PwC” refers to the UK member ?rm, and may sometimes refer to the PwC
network. Each member ?rm is a separate legal entity. Please see www.pwc.com/structure for
further details.
Using the PwC Total Tax Contribution framework, this study
shows that successful entrepreneurial companies make a
signi?cant tax contribution to the public ?nances in the UK.
They have also made a wider economic contribution as they
have continued to grow through the recession. It is easy
to forget that our entrepreneurs are hard-working people
from diverse backgrounds who have risked failure and made
sacri?ces to pursue their ideas. We must remember that they
create jobs and wealth for their workers and they contribute
to the public purse. We need to celebrate their success as it
brings bene?ts to all.
Ruby Parmar, Partner at PwC
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