The average small business in the UK spends £5,000 and 15 working days a year on tax compliance, a report claims.
A study of 1,017 SMEs by the Federation of Small Businesses (FSB) found that businesses spent a total of 126 hours on tax administration.
The most time-consuming taxes were found to be VAT, PAYE and employer national insurance contributions, taking 95 hours a year combined.
Around a quarter say the taxes they pay are difficult to understand and for many businesses, lack of information about the tax system could also mean missing out on potential benefits.
Over half (55%) say they do not feel informed about the tax reliefs available to them.
Just 21% of firms had heard of the Seed Enterprise Investment Scheme (SEIS), which is designed to encourage investment in early-stage startups.
Enterprise Zone Relief and Enhanced Capital Allowance were only slightly better known, with 27% of businesses aware of them.
Mike Cherry, chairman of the Federation of Small Businesses (FSB), said:
“There are lots of useful tax reliefs out there but many small firms simply don’t know they exist or don’t have the expertise to access them.
If we get small firms accessing these incentives we’ll be on the way to the incremental output gains that are critical to closing our productivity gap.”
Making Tax Digital
The government is attempting to tackle these difficulties with the Making Tax Digital scheme. HMRC is hoping to become one of the world’s most digitally advanced tax administrations.
The scheme focuses on making tax administration more effective, efficient and easier for taxpayers to get their tax right by using digital software.
According to research by Sage, 59% of SMEs were using digital software for accounting in 2018, while 18% continued to use manual methods.
On average, those using digital methods estimated that they were saving 2.3 days a month on accounting processes and 27.6 days a year – worth around £17,000 a year in saved time.
Alain Laing, managing director at Sage UK & Ireland, said:
“British businesses need support to become truly digital, so they can focus on their unique products and services, serving their customers, and driving the UK economy by creating jobs and prosperity.
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