The average small business in the UK spends £5,000 and three working weeks every year on tax compliance according to the latest report from the Federation of Small Businesses (FSB). Nicola Roby, Director at CHW Accountants Bolton explains further and highlights some of the many hurdles small businesses face.
The study of 1,017 SMEs by the FSB found that businesses spent a total of 126 hours on tax administration.
Almost half said determining the tax rates at which they’re required to pay is a challenge and four in ten find exemptions confusing.
Value Added Tax (VAT), Pay As You Earn (PAYE) and Employer National Insurance Contributions (NICs) are identified as the most time-consuming taxes to handle with the average small business spending 95 hours a year complying with the three collectively.
Almost half of SMEs say business rates have made growing their firm more difficult. The same proportion say corporation tax has hampered expansion, with similar numbers stating that growth has been stifled by Employers NICs. One in seven firms said VAT has prevented expansion completely.
For many businesses, lack of information about the tax system could also mean missing out on potential benefits. 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.
Over half 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 start-ups.
Enterprise Zone relief and Enhanced Capital Allowance were only slightly better known, with 27% of businesses aware of them.
Nicola commented, “Time and money spent by SMEs on navigating the tax system is time and money not spent on growing the business. Due to the complexity of the tax compliance process it’s advisable to use a tax specialist to ensure your taxes are paid correctly.”
For tax advice or advice on any other issue relating to your accounts and finances, contact Nicola Roby at CHW Accountants Bolton on 01204 534031 or via our contact us page.
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