SMEs bemoan tax system as survey finds administration is costing £500m a year

posted on 01/10/2013 15:35:28 by Dan O'Sullivan

Small businesses waste an average of 12 days a year trying to stay on top of their tax admin

Number crunching: Tax administration is costing small businesses time and money

Britain's small businesses have been high on the agenda during party conference season, with the top dogs doing their utmost to address their ongoing concerns.

Yet for all Ed Miliband's promises to freeze business rates and George Osborne's claims that the Conservatives are the real party for smaller firms, new figures released this week have indicated that attempts to improve conditions for our nation's businesses have had little success.

The sticky red tape

A survey conducted by the Federation of Small Businesses (FSB) revealed that SMEs are collectively spending £500 million every year to properly handle their tax administration - specifically due to the cost of hiring professionals and purchasing resources to stay on top of their legal obligations.

With the study also finding that the average business owner wastes 12 working days a year trying to understand and complete their tax forms, it appears that the contentious issue of excessive red tape continues to blight small firms' activity.

Given that George Osborne has been eager to emphasise the lengths the coalition has gone to in a bid to improve conditions for SMEs, the results of the survey are likely to make uncomfortable reading for a Chancellor who's attempting to position the Conservatives as the party for small businesses. 

Delving deeper

Essentially, the real problem is that the main political parties are yet to implement - or even propose - a comprehensive series of tax reforms that would have a beneficial impact on small businesses.

While the figures already induce a sense of negativity, delving a little deeper reveals more concerning statistics. Indeed, 30% of respondents to the FSB's report admitted that cash-flow problems have prevented them from paying their taxes on time, and a further 19% said difficulty understanding the system meant they ended up making late payments.

Taking into account the struggles facing the nation's smaller businesses, it seems the tax situation is exacerbating the problems they're battling with as they fight to keep their heads above the water.

And as the major political parties attempt to convince the electorate that they have the answers small firms are looking for, George Osborne could face some tough questions at election time if things don't improve between now and 2015.

Finding a solution

As with many of the issues that SME owners tackle in running their businesses, the key to curing their headaches lies in simplification.

To this end, the FSB continues to call for an easier taxation system that is less time consuming and more focused on a cash-based accounting method - one that could be used to create an 'enterprise tax' system. Even if this solution sounds complicated, the organisation says the measures would improve efficiency and considerably reduce the amount SMEs are forced to spend on financial advice.

Essentially, the real problem is that the main political parties are yet to implement - or even propose - a comprehensive series of tax reforms that would have a beneficial impact on small businesses.

George Osborne can continue with quips about "red tape and yellow cable" while Ed Miliband promises to freeze business rates, but the area in which there is the opportunity to make enduring change is taxation. Unfortunately, at the moment it appears to be lacking the attention it needs.

Dan O'Sullivan

Dan O’Sullivan is Make It Cheaper's Web Content Manager, which means much of his time is dedicated to ensuring we have plenty of online material to help business owners understand the energy, insurance and telecoms industries. With years of experience working alongside SMEs, Dan is committed to making life as easy as possible for smaller firms. You can email Dan at

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