Tax regime confuses financially literate entrepreneurs

One third (32%) of Britain's small business owners do not know what they will be paying in corporation tax this year, according to research by Bank of Scotland Business Banking.

The survey into financial literacy levels amongst small business owners in Britain also reveals that more than a third (35%) remain oblivious to the impact of the government's recent changes to the tax regime on their business's financial affairs.

Despite the widespread confusion around tax, the research reveals an otherwise high level of financial literacy amongst Britain 's small business community. Nine in ten (90%) entrepreneurs claim to understand the rules, processes and procedures for managing their business's financial affairs, despite the fact that three quarters (75%) have no qualifications or training in dealing with such matters.

Responsibility for financial matters

The understanding demonstrated by the majority of small businesses appears to stem from their hands-on experience. Over half (55%) of all small business owners in Britain take total responsibility for the day to day financial aspects of running their business, while only two in ten businesses (19%) are largely dependant upon external assistance to help manage their business's financial affairs.

Those who take complete responsibility for the management of their company’s finances work an average 49½ hours per week - five hours longer than those who take a ‘back seat’ and have little or no responsibility for managing the finances. Compared to the standard 35 hour week, those who run a business and also insist on looking after the finances, are working two extra days a week.

Keeping an eye on cashflow

When it comes to sound financial management, it appears that Britain 's SMEs are in safe hands. Eight in ten (81%) small business owners either know exactly, or have a very good idea of, their cashflow position on any given day. Nearly three-quarters (73%) assess their cashflow position and make forecasts or projections at least once a month.

Mark Curran, Head of Relationship Management at Bank of Scotland Business Banking said: "Small business owners are confident in their own abilities to administer the financial management of their businesses - a skill which appears to have been largely self-taught. Such a high level of financial literacy can only be good news for the economy, leading to fewer insolvencies resulting from financial mismanagement. Despite this, there is still a great deal of confusion surrounding the overly-complicated tax regime for SMEs. With so many small business owners taking responsibility for the management of their financial affairs, it's vital that they are able to understand their tax liabilities. Simplification of the tax regime for SMEs is required if this knowledge gap is to be filled."