The average small business in the UK spends £5,000 and 15 working days a year on tax compliance, a report claims.

A study of 1,017 SMEs by the Federation of Small Businesses (FSB) found that businesses spent a total of 126 hours on tax administration.

The most time-consuming taxes were VAT, PAYE and employer national insurance contributions, taking 95 hours a year combined.

Around a quarter say the taxes they pay are difficult to understand.

For many businesses, lack of information about the tax system could also mean missing out on potential benefits.

Over half (55%) say they do not feel informed about the tax reliefs available to them.

Just 21% of firms had heard of the Seed Enterprise Investment Scheme (SEIS), which is designed to encourage investment in early-stage startups.

Enterprise Zone relief and Enhanced Capital Allowance were only slightly better known, with 27% of businesses aware of them.

Mike Cherry, chairman of the FSB, said:

“There are lots of useful tax reliefs out there but many small firms simply don’t know they exist or don’t have the expertise to access them.

“If we get small firms accessing these incentives we’ll be on the way to the incremental output gains that are critical to closing our productivity gap.”

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