Small business owners’ hesitancy to claim vehicle expenses could harm future profits, as millions return to travelling for work purposes following the lifting of lockdown restrictions.
While Zoom’s legacy is here to stay, millions of workers have returned to the workplace, incurring tax deductible business costs. However, a failure to claim costs for insurance, fuel, repair and parking by SMEs has the potential to cut profits, according to research into business owners’ understanding of business expenses by The Accountancy Partnership.
A third of – or two million – SME owners are unlikely to claim back any vehicle expenses, due to not knowing what qualifies as legitimate, meaning that they will be missing out on significant tax breaks at a time when SMEs are already under huge financial strain.
85% of people prefer meeting in person as it allows them to build stronger, more meaningful business relationships, and 77% value the ability to read body and facial expressions, demonstrating the appetite for in-person meetings now restrictions permit them.
Lee Murphy, managing director at The Accountancy Partnership said: “As with many of HMRC’s expenses policies, the rules around claiming vehicle expenses can be complicated. There are different rules for sole traders and limited companies when it comes to vehicle expenses, which may be causing confusion and putting business owners off claiming, leaving their business’s financial health at risk.”
The Accountancy Partnership’s research found that 44% of SME owners who fail to claim expenses do so because they are unsure what qualifies as legitimate or are worried about the risk of penalty payments. A further 41% ‘do not have time’ or ‘cannot be bothered’ to file their expenses.
Lee continued: “During the pandemic, when business travel was at a minimum, business owners may have refrained from claiming for minimum miles as it was perceived as not worth the time, but as they begin to travel more, the money that could be claimed back will build to more significant sums.
“Business owners can claim 45p per mile for the first 10,000 business miles when them or their employees use their own cars. If the whole 10,000 business mile allowance was used, owners would be able to claim £900 back in VAT per person per year.
“Vehicle expenses are not just limited to miles – vehicles, insurance and road tax can all be claimed back as well. Failing to claim these, as well as other costs that arise from business, can leave businesses with larger than necessary tax bills which may harm overall profitability.
“Although expenses can be something of a minefield to negotiate at times, it is always worth claiming back on any reasonable costs that arise as a direct result of business. Finance professionals have extensive experience and knowledge when it comes to HMRC’s policies, so it is always worth consulting your accountant or bookkeeper if you are unsure of what qualifies.”