The complexities of the UK tax system cost the country’s small businesses £500 million a year to deal with, according to a new report from the Federation of Small Businesses (FSB).
The body estimates that small business owners spend an average of 12 working days a year to fill out forms and calculate tax bills – time that could better be taken up working on their businesses.
Over 75 per cent of firms informed the FSB they spent up to £5,000 a year in paying professionals and upgrading software systems in a bid to keep up with evolving tax rules. Subsequently, the FSB estimates its members spend around £500,000 each year on administrating their tax liabilities.
John Allan, chairman of the FSB, 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."
Half of respondents take between two and eight hours a month meeting tax obligations. But despite this effort, one-fifth of SMEs surveyed said they have been forced to pay their taxes late as a result of failing to properly understand the rules.
The FSB is urging the Government to consider a simpler tax system, which would reduce the burden on fledgling businesses and give them time to grow instead.
"There have been long-running issues with complex tax statuses if you’re a sole trader or running an incorporated business," added Allan.
"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."
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