Hidden taxes cost SMES £10 billion a year
Businesses in the UK are facing costs of up to £10 billion a year thanks to the tax system, with small businesses particularly hardest hit, the Association of Accounting Technicians (AAT) has claimed.
The deadline for self-assessment tax returns is at the end of January and the AAT found that SMEs spend £9.9bn each year meeting tax compliance, compared to £100m paid by larger firms.
Each of the UK’s 2.25m SMEs pays £4,376 in tax compliance, around half of the £8,907 paid by larger businesses.
While the burden for SMEs is lower, around 1.7m of those companies have no more than four employees compared to 250 or more found in large businesses.
As a result the costs impact much more greatly on the smaller firms as more time is required to meet tax compliance.
SMEs were found to spend up to two hours per week on compliance compared to six hours for larger firms.
Although the figure is three times less, the cost to the business is proportionately higher due to the lower head count.
Given their limited resources, these tax burdens can cause many issues for smaller firms as staff could be focusing on other aspects of the business such as helping growth.
Should tax burdens take too much of a toll, these smaller companies could seek business rescue to help streamline the running of the firm.
This should reduce unnecessary spending or even cut it completely, aiding the everyday running of the companies.
SMEs form the backbone of the UK economy but this tax burden could weaken them dramatically if it is not properly managed.
Staff spending time on additional tax compliance could otherwise be focusing on business growth, marketing, sales or even product development.
The AAT suggested that 80% of its members think the tax system in the UK is too complicated and suggested that simplifying the system would ease the burden on small firms.
By Phil Smith