How can smaller firms avoid a mammoth tax bill?
Business Industry Small businesses are largely responsible for the UK’s tax gap. However, with more tax knowledge, they could save themselves thousands of pounds and gain themselves finance skills along the way.
Many small businesses are losing substantial amounts of money each year due to their failure to accurately report taxes. While tax is a complex business, it shouldn’t be so complex that your business suffers as a result.
SMEs top the tax gap tables
The UK is the envy of the world for its low tax gap, the difference between the tax HMRC estimates is due and that collected. However, it could still be cut more if help was on hand to enable small and medium-sized enterprises (SMEs) to navigate the inherent complexities associated with achieving tax compliance. Those at the smaller end of the SME spectrum are responsible for 41% (£13.7 billion) of the gap (HMRC, June 2018). In contrast, large companies are responsible for just £7 billion.
It is a given that large firms have access to the professional and financial expertise required to ensure they precisely pay the right amount of tax owed… not a penny more, not a penny less.
In contrast, four out of five SMEs cannot access that level of expertise, resulting in them losing around £15,000 a year off their bottom line, on average (Association of Accounting Technicians research, April 2018).
Furthermore, failure to report accurate tax liabilities can lead to regulatory fines, which can prove crippling for smaller firms.
Small businesses are the backbone of the British economy; it’s vital that they aren’t disadvantaged when engaging with the tax system. While AAT tirelessly campaigns for a simpler and fairer tax regime, ultimately it remains the responsibility of each and every business to ensure they are playing by the rules.
Support for submitting tax returns isn’t hard to find
Fortunately, a solution is to hand. The recent proliferation of highly-automated cloud accounting software is making it easier for small businesses to automate their record keeping. As a result, accurate accounting and tax information can be accessed at the touch of a button. Production of high-value, real-time reports can even reduce the need for a finance expert.
With Making Tax Digital now looming large, it’s a perfect opportunity for SMEs to modernise their accounting systems, harness the power of artificial intelligence and machine learning – or risk falling behind.
There are, of course, thousands of qualified accountants throughout the country who daily provide expert advice for SMEs keen to ensure they pay their taxes correctly, but not become too burdened with the administration and compliance involved themselves. In addition, there’s plenty of information available both from HMRC and Informi, who provide expert advice and guidance for small businesses, on submitting company tax returns.
Finally, if you run or work for a small business yourself, why not consider getting yourself trained? There’s a variety of courses available that can boost your knowledge of tax and other finance requirements for business. Often, you’ll gain new qualifications, meaning you’ll have professional recognition for your expanded skillset.
The UK tax gap is one of the lowest in the world, with the current gap standing at just 5.7%. Small businesses should receive all the support they can in leading the charge to drive it down even further.
AAT is running a series of Tax Updates throughout March and April, at which accountants and business owners can boost their knowledge of the latest taxation changes and how they will be affected. To book at one of our many locations, including London, Birmingham and Newcastle, please visit eventsforce.net/aatevents/208/home