Late VAT submissions face a 15% surcharge per quarter of unpaid VAT – or 60% annually. Mr Alder said these rules were just the tip of the iceberg and pointed to a further swathe of red tape affecting small firms.

They include filing accounts to Companies House, registering under the Data Protection Act, keeping on top of working time regulations, legal responsibilities to employees, drafting a health and safety policy, assessing the risks within a workplace and in some cases, putting in place money laundering controls.

He is also concerned that the long list of insurances required – although not all compulsory – such as business insurance to cover employers’ liability, public liability, product liability and business interruption policies, could make people think twice about starting their own enterprise.

Mr Alder said: “The AAT has 2,805 self-employed members in practice, who in turn have a total of 274,633 clients – many of which are small businesses which require accountancy services.

“If these enterprises cannot flourish, that will have a massive impact on our members. We urge the next Government to ensure the success of SMEs is a priority for the next few years.”

Smaller firms are being put off from recruiting staff by bureaucracy