UK’s small businesses ignoring minor expense claims » SMEInsider

UK’s small businesses ignoring minor expense claims

UK freelancers and micro-businesses are missing out on millions of pounds worth of tax relief from unclaimed expenses they deem too small or time-consuming to put in their accounts, according to new research.   

A study carried out by cloud accounting software provider FreeAgent, found that nearly a quarter of a billion pounds worth of expenses with individual values of £10 or less are being unclaimed by UK micro-business owners every year.

By using an aggregated sample of 2.5 million expenses worth a total of £168m that were logged by customers in FreeAgent throughout 2015, the company found that the average micro-business owner has around £216 worth of expenses with individual values of £10 or less every year.


Ignoring sub-£10 expenses

However, in a recent survey of 100 web professionals carried out on behalf of the company, nearly a quarter (22 per cent) of respondents said they didn’t think it was worth claiming any expense that cost them £10 or less. Projected across the UK’s estimated 5 million micro-businesses, this proportion equates to approximately £238m in unclaimed “small” expenses.

The research also revealed that a further 14 per cent of people said they would not bother claiming expenses if they were worth less than £5 – suggesting that the overall amount of expenses actually being unclaimed across the UK could be even higher.

In addition, just 39 per cent of those surveyed said that they claimed back all of the expenses they incurred for their business, while one in every 20 (five per cent) respondents admitted they didn’t claim any of their expenses whatsoever.


‘Be scrupulous  about reclaiming expenses’

Ed Molyneux, CEO and co-founder of FreeAgent, said: “In order to avoid overpaying tax, all small business owners should be scrupulous about reclaiming their expenses. But it’s surprising how few web designers and developers in the UK actually do claim everything back, and how many ignore or dismiss certain expenses for being so small.

“Whether it’s £5 or £500, that’s all money which you can claim tax relief on, and in the case of the smaller expenses, it’s also money that quickly adds up. We found that nearly one in four micro-business owners wouldn’t claim expenses worth £10 or less – presumably because they’re too small to bother with or it takes too much time to log them – and that suggests hundreds of millions of pounds are going unclaimed across the whole of the UK.

“Even for a freelance business or small agency, those little expenses can end up being worth hundreds, or thousands, of pounds when they’re all combined – so it’s strange that people seem to think it’s too much hassle or not worth the effort to claim these back.”

  • Steve Connolly

    This is a good article and in addition to this there is good research (Legal & General State of the Nation’s SMEs 2015) to suggest that there’s an even bigger opportunity for unclaimed expenses for up to 70% of small businesses and owners.

    e.g. £1,176,000,000 of unclaimed expenses for a single item…. Life Cover!

    That’s £1.2BILLION if we take an average Life Cover policy of £35 per month for each company Director (I’m assuming one Director per company here).

    Want another big number?

    £352,800,000! £353MILLION!

    Is approximately how much tax is being payed to the exchequer by SMEs EACH YEAR when its unnecessary.

    If you consider that a Life policy runs, on average, for 20 years this means that the total amount that SMEs are overpaying in tax is a staggering…

    £7BILLION over a 20 year period!

    That’s an average of £2,520 per Director/business in the UK.

    No need to set up a tax haven in Cayman; no tax evasion… just basic common sense and swapping your existing life cover for an identical product – Relevant Life cover.

    As a referral agent for an independent Insurance broker these are conservative calculations as to how much this equates to with some unscientific, but experience-based, assumptions – and you should always speak to an FCA approved Insurance Broker for professional advice – but I’m happy to refer you to my partner company should you be interested in checking it out for yourself – please get in touch.