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Small businesses will waste £7.15 billion in unnecessary payments to the taxman this year, research finds.
This equates to an average of just over £1,500 for each of the 4.5 million small and medium-sized businesses (SMEs) in the UK, according to a survey looking at company tax wastage by professional advice site unbiased.co.uk.
The Small Business Tax Action Report examines the savings SMEs could make by making better use of the array of allowances, tax credits and tax efficient business support schemes that are at their disposal.
The number one area of tax wastage for SMEs is incorporation, which stands at more than £4.22 billion alone, followed by failure to make use of self-employed contractors (£2.05 billion) and research and development relief (£373 million).
Research and development relief (R&D relief) is another area of tax relief under-utilised by SMEs in Britain. In the current tax year, research and development expenditure carries a 200 per cent deduction against profits (essentially halving a business’s taxable income) and this is set to rise to 225 per cent in the 2012/13 tax year.
Currently only 12 per cent of eligible businesses make use of R&D relief, and if that proportion was to double, businesses would save £373 million in wasted taxes this year alone. Karen Barrett, chief executive of unbiased.co.uk says, ‘The majority of this waste is down to businesses failing to understand what George Osborne calls the ‘spaghetti bowl’ of the UK tax relief system.
‘Tax is a vast and complex subject and business owners often simply do not have the time to manage their tax affairs or understand the allowances available to them whilst also running their business day to day. Currently more than three in five small business owners say they use a professional adviser, such as an accountant or independent financial adviser for their business and it is these professionals who can really make a difference to the amount of tax a business pays.’
For free, impartial advice on all tax issues, including VAT and PAYE arrears call 0844 846 7475 and talk to one of our specialist advisors.
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