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The tax system costs businesses up to £10bn in hidden costs a year, with small and medium-sized enterprises (SMEs) bearing the brunt, according to research by the Association of Accounting Technicians (AAT).
The organisation’s survey of 500 firms found that each SME pays an average of £4,376 in tax compliance costs, just under half the £8,907 paid by larger businesses.
The tax system costs businesses up to £10bn in hidden costs a year, with small and medium-sized enterprises (SMEs) bearing the brunt, according to research by the Association of Accounting Technicians (AAT).
The organisation’s survey of 500 firms found that each SME pays an average of £4,376 in tax compliance costs, just under half the £8,907 paid by larger businesses.
The average burden for SMEs is lower than that of its bigger rivals, but most small firms have no more than four employees, compared with the 250 or more found in large businesses, making the impact disproportionately higher, the AAT study indicates.
Strain is also suggested by the time spent each week on tax compliance: the average SME takes up to two hours, compared with six spent by a large business with a significantly higher head count.
Seven out of ten SMEs say they spend too much time dealing with tax issues, and the same ratio believe the tax system is overly complex.
The AAT has responded to its findings by making recommendations to help stimulate SMEs’ growth:
- combine income tax and National Insurance;
- streamline tax bands and thresholds;
- clearer HMRC information, with signposting for easier navigation; and
- reduced number of reliefs and rules.
The association’s tax policy adviser Brian Palmer said, “All political parties have identified small businesses as key to fuelling the UK’s economic growth. However, the tax system needs to be straightforward to make this possible. A simpler system would allow more people to file their own returns and take control of their own tax planning, and diminish the significant cost some businesses, encounter.
“It would also limit the various different interpretations that can lead to loophole tax evasion schemes. This will enable the UK to take the lead in having a simpler and more business-friendly tax system,” Palmer added.
AAT survey is great results. We are legal advisors in Exeter and trying to work to reduce tax on income basis. But our effort was not enough. I think this survey will ease our effort and we can start dreaming for the change and workfor it again.