UK BUSINESSES are shouldering £10bn a year in extra tax costs, with the majority falling to the country’s SMEs, the AAT has found.
With the self-assessment deadline fast approaching, the accounting body canvassed the views of 500 businesses to discover the cost of compliance for UK business. It found that SMEs spend around £9.9bn each year on tax compliance compared to the £100m that larger firms pay.
On average, the UK’s SMEs incur £4,376 in tax compliance costs, just under half the £8,907 large businesses typically pay. While the average tax burden for SMEs is lower, the vast majority of these enterprises have no more than four employees compared to the 250 or more employees found in large businesses. As such, the impact on SMEs is proportionally much greater.
Compliance is also a time-consuming affair. The average SME spends up to two hours per week on tax issues, compared to the six hours of an average large business. While the SME total is a third of that undertaken by large business, the cost to the business itself is proportionately higher due to their lower head count.
The AAT has added its voice to those calling for the unification of national insurance contributions and income tax. It also suggested streamlining tax bands and thresholds; clearer information and ‘signposting’ from HMRC to help business and individuals navigate the system and; a reduction in the number of tax reliefs and rules in order to aid simplification.
AAT chief executive Mark Farrar said: “SMEs are the backbone of British businesses but some are being weakened by a £10bn tax burden. It is a strong indicator of just how hard dealing with tax can be when 80% of our members, experts at navigating through the intricacies of tax compliance, state that the UK tax system is too complicated.
“Making the tax system simpler could help to lift this extraordinary weight, diminishing the costs that SMEs face. This would give SMEs the space they need to invest in growing their business and hiring more staff – a vital component for the UK’s economic recovery.”