New research from the Federation of Small Businesses (FSB) shows the UK’s small business owners are losing around 12 days a year keeping on top of their tax administration costing them half a billion pounds per year.
The FSB’s findings show that half of respondents spend between two to eight hours per month understanding, calculating and completing tax forms. A further 11 per cent spend between two and six days per month, hindering their efforts to grow their businesses.
More than three quarters (77%) say they spend up to £5,000 in addition to their tax bill paying professionals and for software so they can keep up-to-date with their latest obligations.
Further analysis of the data shows that around two thirds of the respondents estimate an annual cost of £3,651 spent on tax obligations – accumulatively this means a minimum of £490 million per year is spent in additional costs.
Worryingly, almost a third (30%) of firms say that cash-flow problems have prevented them from paying their taxes on time, while one in five (19%) say that difficulty understanding what is required or confusion over payment dates has meant they’ve paid late
The FSB has long called for a simpler taxation system for small firms making it easier to deal with and less time-consuming as well as encouraging enterprise and growth. It is now calling for the Government and the Office for Tax Simplification to build on the cash-based accounting system through creating an ‘enterprise tax’ system which would match the lower corporation tax band of £300,000.
The business group believes extending the current system to this level would lead to a more efficient system meaning more firms will be compliant. It would also mean small firms spend less time dealing with their tax commitments and reduce their considerable outgoings on tax advice.
John Allan, National Chairman, Federation of Small Businesses, said:
“Small firms are losing a serious amount of time completing these forms and it’s tantamount to money down the drain as they could spend that time growing their business. The economy is just starting to pick-up and it is the UK’s army of small firms that will drive the growth and create jobs.
“There have been long-running issues with complex tax statuses if you’re a sole trader or running an incorporated business. Creating one new tax system, removing the choice will make it simpler. It will free up time for businesses, it will give them the time to grow and contribute further to the prosperity of UK-plc.”