Tax and regulation compliance costs up £60k for small companies

The UK small business community is collectively spending 15% more on taxes, levies and employment obligations compared to 2011, according to the latest impact of government policy index (IGPI), compiled by the Centre for Economics and Business Research (Cebr) for the Federation of Small Businesses (FSB)

The index, which analyses a range of policy-linked obligations, including business rates, auto-enrolment and insurance premium tax, shows the average VAT-registered UK small business collectively spending over £480,000 each year on these interventions, up from £420,000 six years ago.

Labour-intensive industries are hit particularly hard by government interventions, according to the index. Smaller businesses in the construction sector have suffered a 28% increase in policy-linked costs. The figure is 13 percentage points higher than the IGPI reading for small UK firms as a whole. 

Mike Cherry, FSB national chairman, pointed to surveys which show the UK has fallen from fourth to ninth in the World Bank’s ease of doing business index and to 34th in World Economic Forum’s burden of government regulation rankings, and warned small firms are set to see costs spiral.

Cherry said: ‘Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital, a higher living wage, rising employer auto-enrolment contributions and further business rates hikes.

‘The minute you start firing on all cylinders as a business owner – stepping up your hiring, investment and sales activity – you’re struck with an avalanche of additional cost burdens. That has to change. Proactive efforts should be made to address the debilitating cumulative impact of these interventions on small firms.

‘Mitigating spiralling employment costs through further enhancement of the employment allowance while reforming outdated aspects of the tax regime – not least business rates – would be a good place to start.’

Report by Pat Sweet

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