SMEs bear brunt of UK’s £10bn hidden tax burden

The UK tax system is costing businesses up to £10bn in hidden costs a year, with SMEs bearing the majority of this burden according to new research by the Association of Accounting Technicians (AAT).

On average each of the UK’s 2.25m SMEs incurs £4,376 in tax compliance costs, just under half the £8,907 each of the 9,000-plus large businesses pay on average. However, while the average tax burden for SMEs is lower, the vast majority (1.7 million) of these enterprises have no more than four employees compared to the 250 or more employees found in large businesses.

Related: SMEs call for reductions to corporation tax in the Budget

This means that despite a lower headline cost, proportionately the impact is much higher on SMEs. Mark Farrar, AAT, Chief Executive, said, “SMEs are the backbone of British businesses but some are being weakened by a £10bn tax burden. It’s a strong indicator of just how hard dealing with tax can be when 80% of our members, experts at navigating through the intricacies of tax compliance, state that the UK tax system is too complicated.

Making the tax system simpler could help to lift this extraordinary weight, diminishing the costs that SMEs face. This would give SMEs the space they need to invest in growing their business and hiring more staff – a vital component for the UK’s economic recovery.”