Small firms struggle with tax compliance

Calls are increasing for the government to simplify the tax reporting requirements for small businesses. The time and effort put into navigating the UK's complex taxation legislation in order to comply with requirements is deemed excessive.

 

Analysis of time spent on business tax issues

A report issued on February 19 2018 highlighted that small businesses in the UK spend almost three weeks of each year dealing with tax matters. In addition, the complexities of the tax reporting process mean tax compliance costs around £5,000 annually according to the Federation of Small Businesses. The report also highlighted that companies spend, on average, 95 hours each year filing their tax returns, which equates to 12 eight hour working days.

The research shows that business concerns relate to core taxation that businesses need to pay and not to some of the complex and rarely used taxes. The principal taxes identified as being the most time consuming for small businesses are pay as you earn, National Insurance contributions and VAT. Mike Cherry, the national chairman of the Federation of Small Businesses commented that: "We hear a lot about the need to simplify the UK tax code. In fact, our priority should be the simplification of the tax compliance process". He further added that small businesses often need to pay for outside help to administer certain taxes and this added greater cost burdens.

The Federation of Small Businesses' report also highlights that up to half of small businesses struggle with working out the rates of tax they should pay and what exemptions are available. For example, the take up of business rates relief in enterprise zones is extremely low and this is likely to relate to difficulties sourcing this information.

HM Revenue & Customs is currently undertaking its programme to make tax digital which should enable greater automation of information gathering, however, this will not reduce the complexities of tax code regulations which the Institute of Chartered Accountants state are the length of the King James Bible.

A spokesperson from HMRC stated that the government is "continuing to simplify the tax system, including for businesses" and highlighted that the government's tax reform watchdog had produced 200 measures which had now been implemented.

To discuss your small business tax issues get in touch with our Business Services Partner Robert Willison:

Email: robertw@swindellsaccounting.co.uk

Tel: 01825 763366