Tax admin ‘costs small firms £730m a year’

Tax administration costs the UK’s small firms more than £700m a year, according to a survey of business owners.

The poll by the Federation of Small Businesses (FSB) found that two-thirds of respondents face an average annual outlay of £3,651 on professional tax advice and software in an effort to fulfil their obligations to HMRC – meaning a cumulative total of around £730m across the FSB’s 200,000 members.

The newly published figures also suggest that money is not the only price: owner-managed concerns spend between four and ten days a year on understanding and completing tax forms.

The FSB – a longstanding backer of a time-friendly regime of taxation for small firms that encourages growth – has called on the government and the Office for Tax Simplification to build on the cash-based accounting system through the creation of an ‘enterprise tax’ set-up that would match the lower corporation tax limit of £300,000.

The organisation’s national chairman, John Allan, said the loss of time on tax admin is “tantamount to money down the drain as [businesses] could spend that time growing… The economy is just starting to pick-up, and it is the UK's army of small firms that will drive the growth and create jobs.”

He added, “There have been long-running issues with complex tax statuses if you're a sole trader or running an incorporated business. Creating one new system… 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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