New research from the Federation of Small Businesses (FSN) has revealed that the owners of small firms can spend up to 12 days a year purely to keep on top of their tax administration.
In fact, for half the owners polled, understanding, calculating and completing tax forms takes up between two and eight hours a month, while 11 per cent lose up to six days per month doing similar tasks.
Moreover, in addition to the time commitment, which, as the FSB points out, prevents people actually doing any work, owners tend to spend up to £50,000 on third-party help just to keep up-to-date with their business obligations.
While costs vary regionally, around two thirds of small business owners estimate that they have to spend £3,651 annually on tax obligations, which means that at least £490 million per year is spent by small firms on managing their tax affairs.
Unsurprisingly, these costs are putting businesses under significant pressure, with almost a third of firms saying that cash-flow problems have prevented them from paying their taxes on time, while 19 per cent say that difficulty understanding what is required or confusion over payment dates has meant they have paid late.
The lobby group is therefore calling for the Government and the Office for Tax Simplification to build on the cash-based accounting system by creating an “enterprise tax” system which would match the lower corporation tax band of £300,000.
It says that this would create a more efficient system and would mean small firms could spend less time dealing with their tax commitments and reduce outgoings on tax advice.