According to recent research, conducted by the Federation of Small Businesses (FSB), small and medium-sized enterprises (SMEs) in the UK spend 95 hours a year getting their taxes in order, which costs them around £5,000.
The research revealed that half of SMEs do not feel informed about the relevant tax reliefs available to them, while almost half find it challenging to determine the tax rates they are required to pay.
The research also found that firms are more concerned about the core taxes most firms must pay rather than the more intricate elements of the tax system often seen as the most complex. VAT, PAYE and employer national insurance contributions were identified as the most time-consuming levies.
In addition, 40 per cent feel that tax exemptions are confusing and almost half think that business rates have made growing their businesses more difficult. According to the research, this means that three-quarters of SMEs require specialist help to get their tax bills right.
A spokesman for the business lobby said that, by and large, “small firms understand a tax like VAT but… the sheer complexity of VAT administration means they spend 44 hours a year filing returns”. As he added, if the three working weeks and thousands of pounds a year that small firms lose to tax compliance are added on, “it is a huge drain on national productivity”.
The FSB concludes that lost time and resource is the real issue, not the length of the tax code. Therefore, the group does not believe that the solution is to simplify the tax code but that overhauling the compliance process should be prioritised.
