BRITAIN’S complex and arduous tax system costs the UK’s small businesses £500m per year to deal with, according to a report out today from the Federation of Small Businesses (FSB).
Filling out forms and calculating tax bills takes bosses an average of 12 days per year, the group estimates, time that could better be taken up working on their businesses.
More than three-quarters of firms told the FSB they spent up to £5000 per year in paying professionals and updating software systems to cope with changes to tax rules.
As a result the group estimates its members spend almost £500,000 each year on administrating their tax liabilities.
Half of respondents take between two and eight hours per month meeting tax obligations, while for 11 per cent of firms that rises to between two and six days each month.
And despite putting in this much effort, one-fifth of businesses say they have paid taxes late as a result of failing to properly understand the rules.
The FSB is demanding a simpler tax system, which it argues will take some of this burden off small businesses, encouraging them to grow instead.
One way it suggests achieving this is through a new enterprise tax system that could replace the various other systems in place for firms with a turnover of less than £300,000 a year.
“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,” said FSB chairman John Allan.
“There have been long-running issues with complex tax statuses if you’re a sole trader or running an incorporated business. 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.”