Accountancy services Harris & Co report that the UK"s small business owners are losing around 12 days a year keeping on top of their tax administration at a cost of some £500m, according to research from the Federation of Small Businesses (FSB).
An FSB survey of its members found that half of respondents set aside between two to eight hours per month for understanding, calculating and completing tax forms, with a further 11% devoting between two and six days per month to the task.
More than three quarters (77%) say they spend up to £5,000 in addition to their tax bill paying professionals and for software so they can keep up to date with their latest obligations.
Around two thirds of the respondents estimate an annual cost of £3,651 goes on tax obligations, which the FSB says adds up to a minimum £490m annual spend in additional costs.
John Allan, FSB national chairman, said: ‘Small firms are losing a serious amount of time completing these forms and it’s tantamount to money down the drain as they could spend that time growing their business. 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 FSB’s research also found that almost a third (30%) of firms say that cashflow problems have prevented them from paying their taxes on time, while one in five (19%) say that difficulty understanding what is required or confusion over payment dates has resulted in making late payments.
The business group is now calling for the government and the Office for Tax Simplification to build on the new cash-based accounting system by creating an ‘enterprise tax" system for VAT registered incorporated businesses with turnover of more than £79,000 which would match the lower corporation tax band of £300,000.
The FSB argues that extending the current system in this way would lead to a more efficient system, by removing the need for multiple systems such as IR35, sole trader and incorporation, and would see more firms becoming compliant.
Allan said: ‘There have been long-running issues with complex tax statuses if you"re a sole trader or running an incorporated business. Creating one new tax system, removing the choice 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.’