Why are SME’s not claiming all of their business expenses? Find out in todays article below.
Is your business missing out on money that you could be claiming? According to a new study, many freelancers and small businesses in the UK could be doing just that. Multiple SMEs could be claiming more money on their taxes than they actually do. There were an estimated 5.2 million small and medium sized enterprises in the UK in 2014. If that doesn’t sound impressive to you, think again; these small and medium sized enterprises accounted for over 99% of all UK business conducted in 2014.
While some of these small and medium enterprises are claiming expenses, many are not bothering to claim expenses of a smaller nature. While some of the amounts that are going unclaimed may not be astronomical, any extra cash back could be a big deal to small and medium sized businesses. Small businesses constantly have to stay in the black and struggle to survive, so every little bit counts. Keeping this in mind, the fact that many businesses are missing out not just on thousands but millions in expenses and tax relief and returns means that valuable money is being left on the table that could be going back into the business.
So, what’s the story? A 2015 study was conducted on 2.5 million expenses logged by FreeAgent customers. The expenses were worth 168 million collectively. However, it seemed that certain expenses of a small nature were not being logged. The study found that nearly 250 million expenses for freelance practices or businesses that had values of 10 or less were never making it to the claims process. On the whole, larger expenses and even medium or sizable expenses were logged, but it was the smaller values that fell through the cracks and never logged even though they were clearly occurring.
The average person was not bothering to claim small expenses with the reasoning that small expenses were not really “worth” filing. However, the study found that the average owner of a small business had a total of 216 such small expenses each year that were valued at 10 or less. This meant that on average, an entrepreneur might be leaving quite a bit of money on the table.
So what could be causing the lack of small value expenses being claimed? A survey of 100 web professionals was carried out for FreeAgent to find out. Over a fifth of those surveyed stated that they didn’t think it was worth it for expenses that were priced 10 or less. While this kind of thinking may seem foolish, consider how many times you have thrown small change into a bottle to save for later because it didn’t seem worth it to throw it into your change purpose or carry it around. The same principle applies here; the expenses are so close to nearly nothing that it doesn’t seem worth it to note them. Note one small expense and you likely must note them all to get some money back on them.
However, when you think about the sheer quantity of UK SMEs, the amount of cash being left behind is staggering. While 39% of those surveyed said they claim all business expenses, 5% admitted that they actually didn’t bother to claim any expenses at all. Many SMEs are claiming everything, some are being choosy about what they claim and what they don’t, and still others are barely claiming at all. When you consider the challenges facing small and medium enterprises today, joining the ‘claim everything’ club doesn’t seem like such a poor idea after all.