Tax burden falls on SMEs

Businesses in the UK are forking out up to £10bn in hidden costs a year and the country’s 2.25 million small and medium-sized enterprises (SMEs) are bearing the brunt of the tax burden, with each one paying up to £4,376 in tax compliance costs.

New research by the Association of Accounting Technicians (AAT) has found that SMEs pay just under half of the £8,907 each of the large businesses in the UK pay. However, while the tax burden for the smaller firms is lower, around 1.7 million of these businesses have no more than four employees, compared with the 250 plus in large concerns. This means that, proportionately, the impact on smaller organisations is much higher.

The AAT said that this can also be clearly seen in the amount of time per week businesses spend on tax compliance. The average SME spends up to two hours per week compared to the six hours of an average large business. Whilst the SME total is three times less, the cost to the business itself, is proportionately higher due to their lower head count.

This highlights how, with their limited resources, SMEs bear a higher proportion of the burden in meeting their tax compliance obligations. The impact on the economic cost is also larger due to SMEs compromising the majority of businesses in the UK.

A spokesman for the AAT said that although politicians accept that SMEs are the backbone of business in the UK, some are being weakened by this tax burden. He added that if around 80 per cent of the Association’s members, who are expert at negotiating their way through tax matters, find tax a problem, then it must be incredibly difficult for the average small firm.

Leave a Reply