Small firms losing £25 billion a year to tax admin, new study shows.
Logos & media used in this page may be protected by copyright and are reproduced in the context of Fair Dealing
Published: October 22, 2021
A new report published by the Federation of Small Businesses (FSB), says that the governments Making Tax Digital initiative, which should be making it easier for individuals and businesses to get their tax right and keep on top of their affairs, has significantly increased costs for small firms.
The FSB’s research suggests that these small firms are each spending an average of £4,100 and 52 hours a year on tax compliance and illustrates how the Value Added Tax (VAT) threshold is serving as a disincentive to grow for more than a million firms.
The report says that those participating in the government’s MTD programme, designed to fully digitalise the tax reporting process, face an average cost of compliance of £4,562 which is considerably higher than for those yet to migrate – £2,960.
Ahead of the Budget on 27th October, FSB has called on the government to make the tax system simpler and easier to navigate for small firms, and for the Employment Allowance to be increased to mitigate the impacts of these rising costs.
The study also shows a lack of awareness among small businesses of the tax incentives they’re entitled to – fewer than one in 20 (4%) see the government’s new Super Deduction for plant & machinery investment as a top incentive to invest and expand.
Robert Candy, Chief Executive of the Scaffolding Association, commented “This latest report from the FSB demonstrates again that government is disconnected from the practical elements of running a small business”
He added “There are 6 million small businesses in the UK, with construction making up 20% of those firms. With the current challenges they face, the last thing they need is more burden on resource and more cost. Digitalisation should make the process quicker, easier and more cost-effective but it is clear the current system is doing the opposite”.
Read the full FSB report A Duty to Reform, here.
Notes for editors
The Scaffolding Association is the UK’s largest dedicated trade association representing the Scaffolding and Access industry.
The construction sector employs 2.7millon people, contributes over £100bn to the UK economy which is 7% of Gross Domestic Product (GDP).
Press Contact: Chris Seaton – [email protected] or 07979 531464