A survey by the Federation of Small Businesses (FSB) has revealed that smaller UK firms are spending about 12 days each year doing their taxes – an administrative burden that costs a total of half a billion pounds.
According to the FSB national chairman John Allan, this is hindering their efforts to expand and grow, and a simpler system is needed.
"Small firms are losing a serious amount of time completing these forms and it is tantamount to money down the drain as they could spend that time growing their business," he said.
"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."
The complexity of the tax system has long caused problems for both sole traders and incorporated businesses, he said, due partly to the way tax status has been defined in the UK.
"Creating one new tax system, and removing the choices, 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," Allan said.
The online survey canvassed the views of 2,198 FSB members between 9 and 20 September. Half of respondents said they spend two to eight hours a month doing taxation forms.
Another 11 per cent spend two to six days each month, the FSB said in a statement.
About three quarters of respondents said they also spent up to £5,000 –on top of their tax bill – paying accountants and other professionals, as well as buying software to help them keep up to date with their obligations, it said.
The FSB – which has about 200,000 fee-paying members across the UK with fewer than 250 staff – has estimated that two thirds of the SMBs surveyed believe their tax obligations cost them £3,651 each year.
Almost a third indicated, further, that cashflow problems had caused delays in paying their taxes. One in five said that understanding what is required is difficult, and payment dates are confusing as well.
The FSB is calling for the government and the Office of Tax Simplification to extend the cash-based accounting system, creating an enterprise tax system for businesses turning over at least £79,000 per annum that matches the lower corporation-tax band of £300,000.
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