SMEs troubled by billions in unseen taxes
According to an Association of Accounting Technicians (AAT) study published recently, UK-based small and medium enterprises could suffer hidden costs amounting to a maximum of £ 10 billion a year.
Reports indicate that the majority of small and medium-sized enterprises are charged the most – about £9.9bn a year – while in contrast, larger companies pay about 100million pounds. The study was conducted in January before the end of the deadline for submission of online self-assessment tax returns.
According to AAT figures, there are approximately 2.25 million small and medium-sized enterprises in the UK, each paying £ 4,376 tax compliance costs. Compared to the larger 9,000 companies in the UK, at the average price £ 8,907, this works out as almost half as much.
The cost of tax compliance may be lower than the average UK SME, but 1.7 million companies have four or fewer employees, whereas large companies have 250 or more employees. This leads to a greater impact on SMEs. Businesses also spend time every week on tax compliance, which also has a greater effect on small companies. Large companies can spend up to six hours per week working on tax compliance, as opposed to the two hours spent by small and medium-sized enterprises. However, the burden is much greater for smaller businesses.
AAT have asked for a simplification of tax, including bringing together income tax and National Insurance contributions. The organisation also called for fewer rules, and other tax incentives to make the business of compliance an easier one.
AAT executive Mark Farrar said:
“Having the tax system made easier will help raise this huge, additional weight, and reduce costs in to small and medium-sized enterprises. It will give space for small and medium-sized enterprises to develop their business and hire more workers to invest in. It is necessary for economic recovery of the UK.”
• What are the tax compliance costs?
The answer to this lay in the completing of and filing tax returns, accounts, administration, recording of transactions, and more. A tax burden means the amount of taxes paid to the government for the settlement of tax liabilities.
The increase in consumption tax compliance usually equates to greater consumer prices and fewer numbers of employees. Without a doubt, this ends up affecting the economy.
• Outsourcing as a solution
Outsourcing to experts can decrease costs of tax compliance, leaving business owners with the time to concentrate on other facets of the company. Time, labour and money are the key costs of tax compliance.
You can find out much more on all aspects of tax news over at The Cheap Accountant.