New figures show that by deeming expenses too small or insignificant to claim, sole traders and small businesses are losing out to the tune of millions of pounds in tax relief.
Claiming expenses
If you operate a business you can claim expenses on some of its running costs. UK businesses are required to pay taxes, such as Corporation Tax in the case of limited companies, to HM Revenue and Customs (HMRC). If you claim expenses, the amount claimed reduces your profits and therefore your taxes, therefore you pay less in tax to HMRC, meaning that this can allow you to boost your firm’s bottom line.
If you run a limited company, for example, you can for things such as equipment, machinery and business vehicles. Similarly if you are self-employed sole trader , you can deduct a range expenses from your taxable profit, such as office, travel and staff costs, to lower your tax bill.
Millions unclaimed
Data from Free Agent, an accountancy software firm, shows that millions are going unclaimed in expenses by UK businesses each year. Their research was based on an aggregated sample of 2.5 million expenses, worth £168 million (m) collectively, logged by customers last year. Using this data, Free Agent found that every year, the average micro-business owner racks up roughly £216 in unclaimed expenses with individual values up to £10.
Yet in a survey of 100 web professionals commissioned, 22% admitted that they did not believe it was worth the effort to claim expenses that cost their firms up to £10. When these figures are projected throughout the UK’s estimated five million micro-businesses, we see that there are around £238m in unclaimed ‘small’ expenses every year.
The study further showed that 14% of respondents would not claim expenses up to £5. Meanwhile, only 39% admitted that they claim back all of their company’s expenses, with 20% suggesting that they do not claim back their business’ expenses at all. In other words, the proportion of expenses going unclaimed by UK micro-businesses and freelancers could be far higher than initial estimates.
Quickly adding up
It is vital that small company owners strive to claim back all their expenses, so they do not over pay tax to HMRC.
Unclaimed expenses can be worth hundreds or thousands of pounds even for a small sole trader or small business. Even the smallest of firms can really benefit by making the effort to claim back all expenses no matter how small.
Turner Little
By leaving ‘small’ expenses unclaimed, you could be depriving your business of serious funds, limiting operating capital and growth potential. Therefore it is essential that you invest in the appropriate infrastructure necessary to enable you to reclaim all of your firm’s expenses. Turner Little provides advice in all aspects of operating a business as well as advice on opening UK bank accounts, as well as business filing obligations through our miscellaneous corporate service, to supply the necessary support you require to claim back every expense you are owed.
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.
