Small businesses 'not making most of tax breaks'

Research has revealed that small and medium-sized businesses (SMBs) are spending a substantial amount of money on taxes that they don't need to be paying.

Conducted by unbiased.co.uk, the Small Business Tax Action Report revealed that SMBs are due to waste in the region of £7.15 billion over the course of 2012 in extra payments to the taxman. This breaks down as an average of £1,500 per business.

Karen Barrett, chief executive of the comparison site, stated that the money is being wasted largely due to what chancellor George Osborne calls the “spaghetti bowl” of the UK tax relief system.

MS Barrett added: “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 over three in five small business owners say they use a professional adviser, such as an accountant or independent financial adviser (IFA) for their business and it is these professionals who can really make a difference to the amount of tax a business pays.”

The study found that incorporation tax accounted for £4.22 billion of wastage, followed by the chance to make use of self-employed contractors, which accounted for £2.05 billion of wastage.