Research conducted by the Association of Accounting Technicians (AAT) reveals that the tax system costs businesses up to £10bn in hidden costs a year, with SMEs (small and medium-sized enterprises) bearing the brunt.
Results from a survey of 500 firms, show that each SME pays an average of £4,376 in tax compliance costs, which is just under half of the £8,907 paid by larger businesses. Whilst the average burden is higher for larger businesses, most small businesses have no more than four employees, compared with the 250+ found in large businesses. The study by AAT indicates that this makes the impact disproportionately high.
There is another issue too; the sheer amount of time businesses have to spend on tax compliance is putting them under strain. The average SME spends up to two hours on tax compliance, whereas large businesses spend up to six. Again, this is disproportionate, as large businesses will have a much larger number of employees and resources.
The consensus is that small firms are disadvantaged by the tax system. Seven out of ten SMEs say they spend too much time dealing with tax issues, and the same ratio believe the current tax system is overly complex.
The AAT have thought up a list of things they believe will help stimulate the growth of SMEs in response to its findings:
- Combine income tax and National Insurance;
- Streamline tax bands and thresholds;
- Clearer HMRC information, with signposting for easier navigation; and
- Reduce number of reliefs and rules.
We can help alleviate the time and money you spend on tax related issues as much as possible. This will allow you to focus on what matters most, running your business.
To find out how we can help you, contact us at your nearest office.