The government's war against red tape has been dealt a blow after research claimed SMBs are paying out significantly more on compliance costs than two years ago.
According to the Forum of Private Business (FPB), the average SMB is shelling out 8.5 per cent more on compliance costs, such as tax and employment laws, than in 2011.
The FPB fingered the recent introduction of HMRC's real-time information (RTI) payroll process as the chief culprit, estimating that its rollout will cost small businesses £311m – more than twice the £120m cost estimated by HMRC.
RTI, which last week came in for some criticism from the National Audit Office, is designed to enable PAYE information to be captured when payments are made, rather than annually.
But according to the FPB, its introduction is probably the main factor behind an 11 per cent hike in the amount SMBs are stumping up for external providers of payroll and tax support.
"We believe this is largely down to RTI, and firms having to pay a payroll specialist to manage their employees' PAYE bills, but by contrast businesses are paying out slightly less on internal compliance managed in-house," said Robert Downes, policy adviser at the FPB.
"The logic here seems to be to pay an expert to do a job they can no longer do themselves, for whatever reason that may be."
Taxation compliance remained the single biggest outlay for small firms, followed by employment law, the FPB found.
The third biggest outlay – health and safety (H&S) – has seen a fall in costs since 2011 and should fall further after October, when sweeping changes to workplace H&S are implemented.
"The changes in October should really see H&S costs come down as the onus shifts to employees having to take more of a responsibility for their own safety in the workplace, and the end of strict liability for employers will mean firms cannot be held responsible for accidents beyond their control," said Downes.
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