Small businesses are losing around 12 days and over half a billion pounds due to their tax administration requirements.

New research carried out by the Federation of Small Businesses (FSB) shows that the majority small business owners are spending between two to eight hours a month keeping on top of their tax paperwork and up to £5,000 to have professionals and software help them keep in line with their tax obligations.

Around 11 per cent of respondents saying they spend two to six days a month, which eats into the time they have to dedicate to growing their businesses.

The data also shows that over two thirds of respondents estimate an annual cost of £3,651 for tax requirements, adding up to over £490 million a year being spent in additional tax costs.

Not surprisingly this has affected some businesses, with 30 per cent of businesses surveyed saying their cash-flow problems have prevented them from paying their taxes on time, while one in five say they have had to pay their taxes late due to difficulty understanding what is required or confusion over payment dates.

John Allan, national chairman of the FSB, said: “Small firms are losing a serious amount of time completing these forms and it’s tantamount to money down the drain as they could spend that time growing their business. The economy is just starting to pick-up and it is the UK’s army of small firms that will drive the growth and create jobs.

“There have been long-running issues with complex tax statuses if you’re a sole trader or running an incorporated business. Creating one new tax system, removing the choice will make it simpler. It will free up time for businesses, it will free up time for businesses, it will give them the time to grow and contribute further to the prosperity of the UK-plc.”