SMEs are spending an average of 15.7% of their total expenditure costs in fulfilling tax obligations, according to new research.

Figures released by business information company Creditsafe also reveal SMEs with a turnover of £1m-£5m are attributing the greatest proportion of revenue to tax - 18.5%.

Tax ranks third in the league table of total business expenditure for SMEs, with wages accounting for almost a third (29%) of total expenditure and investment in stock and materials (17.5%). Fuel costs now account for 10% of overall costs.

David Knowles, marketing director of Creditsafe, said the tax burden on SMEs impacts profitability and the level of investment businesses can pour into other areas, such as expanding into new markets.

'Many firms are struggling to survive as a result of restricted cash flow. A growing propensity for firms to hold onto their cash and delay payments, combined with reticence on behalf of the banks to offer credit, could drive many SMEs to the wall in 2009,' he said.

Further Reading:

Loss offset extension of limited use for SMEs

HMRC tax helpline inundated