Home Business News Small business owners failing to claim £5.6billion in expenses

Small business owners failing to claim £5.6billion in expenses

by LLB Editor
16th Jun 21 12:25 pm

£5.6 billion of expenses go unclaimed as a result of SME owners’ hesitancy to include expenses in tax returns, according to new research.

Two-thirds (65%) of business owners admitted to not including their legitimate business expenses, with some small businesses failing to claim more than £10,000 in taxable expenses, which is hampering their profitability, found the study by The Accountancy Partnership, a leading provider of online accounting services.

More than half (55%) of business owners check what qualifies as a business expense online before incurring commercial costs, and a further 10% of business owners – approximately 600,000 – were unsure what qualifies as a legitimate business expense.

Insights from the research also reveal that as many as 132,000 SME owners are hesitant to claim expenses for their business in case of HRMC tax penalties, which can have considerable impact on a business’s finances.

Furthermore, 43% of business owners have failed to claim businesses expenses due to lost receipts and invoices, while a further 36% were simply unsure whether it would pass HRMC’s stringent rules. Worryingly, 41% could not be bothered or didn’t have the time to file expenses, meaning many are missing tax relief that could be beneficial to their business.

Lee Murphy, managing director of The Accountancy Partnership, said: “Business finance can be bewildering to many owners and employees, however, we urge everyone to claim the relief they are entitled to no matter how small individual claims may seem. When aggregated, many businesses are missing out on considerable amounts of tax relief which can make a big difference to their tax bill, and therefore influence their profitability and even the future health of their firm.

41% of SME owners surveyed said they were hesitant to expense food and drink, with what qualifies as subsistence in HRMC’s rules somewhat of a grey area as the cost must arise out of necessity and be considered reasonable from a business perspective.

43% of respondents were also unlikely to claim for tax relief on work clothing and uniform, despite the fact that businesses can claim relief on personal protective equipment like high-vis jackets and safety boots.

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