Tax red tape costs £2.4bn, Treasury told

Paying taxes costs British businesses £2.4bn a year to administer, according to a report currently gathering dust on the desk of the Chancellor, Gordon Brown.

The astonishing figure does not include the cost of collecting and reclaiming Value Added Tax, which is believed to cost at least as much again.

The £2.4bn figure is contained in a report commissioned earlier this year by the Chancellor and compiled by researchers working for the Inland Revenue and Customs and Excise.

It is understood that the Treasury had hoped the figures would be available in time for its pre-budget statement, expected at the end of this month. But the results compiled by the Inland Revenue and Customs and Excise are so embarrassingly high, it is now unlikely they will be released until next year.

The Independent on Sunday has seen a draft version of the study, which was conducted by Anne Hansford, a professor at the University of the West of England, and BMRB International, a market research agency.

They talked to hundreds of businesses and then extrapolated the findings into a national figure.

The study found that the largest 2,000 companies are paying out £509m in administration and accountancy costs while the small and medium business sector – firms with less than 250 employees – is paying out an annual £1.7bn.

The main costs relate to staff, external advice and computer software.

A series of draft recommendations, compiled by accountants BDO Stoy Hayward, say that ambiguous and badly-timed requests for information by the Revenue are among the principal reasons for the high costs.