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Survey by Directline For Business finds SME’s unaware of tax reliefs

Survey by Directline For Business finds SME’s unaware of tax reliefs

New research by leading small business insurance provider Direct Line for Business reveals that SME owners could be losing out on vital income because they are not fully aware of business tax reliefs and the potential government allowances available for them to claim.

The research, conducted in conjunction with Enterprise Nation, revealed nearly half of SMEs (46 per cent) have a “very poor” understanding of the government tax reliefs available. This amounts to nearly 3.5 million SMEs across the UK that may not be fully utilising the available tax benefits.  A further 18 per cent claimed to have a “below average” understanding of the business tax relief measures available to them.

However, six per cent of SMEs claim to have a “very good” understanding of the range of tax relief measures and allowances available. A further five per cent said that they had an “above average” understanding, while just under one in five (18 per cent) said that they had an average understanding.

Nick Breton, Head of Direct Line for Business said: “Small enterprises account for over 99 per cent of the UK’s businesses so they are truly the backbone of our economy. However, this research highlights that there is a lack of awareness of the benefits available to small business owners which can ultimately impact the development and growth of their business.

Emma Jones, founder of Enterprise Nation said: “Business owners are busy people. They are focused on perfecting their product, serving customers, and making sure the bills get paid. This doesn’t always leave time for checking out the latest tax relief benefits. My advice is to find an accountant who can be your go-to person for understanding what’s best for the business from a tax and accounting perspective.”

Awareness and perceived eligibility of business tax reliefs and allowances amongst SME owners:
Relief benefit
Percentage of SME owners aware of relief benefits
Percentage of SME owners who believe they are eligible for relief benefits
Capital allowances
37%
15%
Corporation tax marginal relief
35%
14%
Small business rate relief
31%
13%
Business rates relief
26%
7%
Employment allowance
23%
9%
Entrepreneurs’ Relief
19%
4%
Rural and charitable rate relief
8%
0%
Enterprise Zone relief
7%
1%
Source: Survey conducted by Enterprise Nation on behalf of Direct Line for Business, March 2016

The most common types of help for small businesses to reduce their taxes bill are:

  • Employment allowance can be claimed to reduce the amount of National Insurance contributions by employers by up to £3,000. Any employers that pay Class 1 National Insurance contributions can claim employment allowance and it can be claimed through payroll software.

 

  • Corporation tax allowances and reliefs can be applied to certain purchases – such as equipment, machinery or vehicles – bought specifically for use in the business, while businesses can claim for reliefs on expenditure on activities such as research and development, as well as profits from patented inventions and creative projects such as film, theatre and video games.

 

  • Small business rates relief can be claimed by businesses that operate out of one property and have a rateable value of between £6,000 and £12,000. It operates on a sliding scale of relief depending on the value of the property, meaning that businesses won’t have to pay any business rates on properties with a rateable value of £6,000 or less. Businesses can apply for business rates through their local council.

 

  • Entrepreneurs’ relief can be claimed when an individual sells all or part of their business and can reduce the amount of Capital Gains Tax paid. It can be claimed by businesses meeting certain criteria and can be done either through a self-assessment tax return or by completing a dedicated form.

 

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