The average small business’ annual compliance bill has soared by £713 above inflation, new research from the Forum of Private Business (FPB) reveals.

Small firms have been hit the hardest with compliance bills for businesses with fewer than nine employees having reached £164 per employee – almost seven times the cost paid by companies with 50 or more workers.

The FPB blamed the rise on payments to external contractors as a result of costs associated with the new Real Time Information payroll process, auto enrolment and advice on sector specific regulations.

Taxation compliance remained the single biggest outlay for small firms, followed by employment law, with health and safety third it added.

Mike Dorey, owner of Eastcombe Village stores in Gloucestershire, said the rise was a “concern”. 

“Many small store owners are caught between a rock and a hard place. Paying external contractors such as payroll specialists costs money but the only other alternative is to spend hours doing it yourself, and time, just like money, is a precious commodity that not many of us have to spare these days,” he said.

Commenting on the findings, FPB chief executive Phil Orford said: “Our research shows little has changed in terms of what’s costing small business the most for compliance costs, with external costs continuing to be the main contributory factor.

“We believe this is largely down to the introduction of RTI, following the end of the small business extension, and firms having to pay a payroll specialist to manage their employees’ PAYE bills. In addition we have seen the increasing need to employ specialists to advise ahead of pensions auto-enrolment.”