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SMEs hit with "soaring" compliance costs

The cost of compliance is continuing to soar for SMEs, the Forum of Private Business has claimed.

According to the lobby group, SMEs pay substantially more on compliance than they did two years ago.

It put the total cost of compliance at more than £18.2bn, which is an 8.5 per cent rise compared to figures from 2011.

In addition, companies are paying 11 per cent more to external providers of payroll and tax support compared with two years ago. This is thought to be as a result of the introduction of Real Time Information (RTI), which was introduced in April.

Robert Downes, the forum’s policy adviser, said, “Our research shows little has changed in terms of what’s costing small business the most for compliance costs. The stand-out surprise though has to be the huge increase in spend on external contractors.

“We believe this is largely down to RTI, and firms having to pay a payroll specialist to manage their employees’ PAYE bills, but by contrast businesses are paying out slightly less on internal compliance managed in-house.

"The logic here seems to be to pay an expert to do a job they can no longer do themselves, for whatever reason that may be."

Before RTI was launched, HM Revenue & Customs, anticipated the cost to small businesses to be around £20 million, but the forum said this figure is more than double that at £311 million.

“Government number crunchers never seem to get their sums correct, so it’s no wonder small firms are getting jumpy about the cost of pension auto-enrolment, which by its very nature is going to be hugely more expensive than RTI to set-up, deliver, and also maintain,” Downes added.

However, there was some good news when it came to health and safety, with internal costs here falling slightly since 2011.

The forum said this was likely to fall further after October’s Common Commencement Date when sweeping changes to workplace health and safety are implemented.

Downes said, “The changes in October should really see healthy and safety costs come down as the onus shifts to employees having to take more of a responsibility for their own safety in the workplace and the end of strict liability for employer will mean firms can’t be held responsible for accidents beyond their control."

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