No Relief: Small Businesses Missing out on Millions

No Relief: Small Businesses Missing Out on Millions

New research by Direct Line for Business reveals that SME owners are losing out on vital income because they are unaware of business tax reliefs that they may be eligible to claim.

  • Almost half (46 per cent) of SME owners claim to have a “very poor” understanding of the range of tax relief measures available
  • Two thirds (66 per cent) are unsure of the tax relief measures they could be eligible to claim
  • Over a third of SMEs unaware of any existing tax relief measures 

New research by leading small business insurance provider Direct Line for Business1 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 relief available. This amounts to nearly 3.5 million SMEs across the UK2 that may not be fully utilising the available tax benefits3.  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.

“The research shows that two thirds (66 per cent) of SME owners do no know whether they are eligible for any tax relief measures so we would encourage them to do some research and seek help if necessary to make sure they are taking full advantage of the benefits.”

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.”

Table One: 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

When asked about specific tax relief measures, 15 per cent said that they were eligible for capital allowances, 14 per cent were eligible for relief on corporation tax marginal relief and 13 per cent qualified for small business rate relief. 7 per cent of SME owners stated that they were not eligible for any tax relief measures, while more than a third (36 per cent) of respondents claimed not to be aware of any of tax relief measures open to businesses.

With so many forms of tax relief open to entrepreneurs, Direct Line for Business has outlined the most common types to help small businesses reduce needless expenditure on their taxes:

  • Employment allowance can be claimed to reduce the amount of National Insurance contributions (NICs) 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 (R&D), 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.

For further details on Direct Line for Business Home Business Insurance, visit: https://www.directlineforbusiness.co.uk/small-business-insurance/home-business-insurance

Notes to Editors

1 Direct Line for Business’ research conducted in association with Enterprise Nation amongst 180 SME owners between 1st and 11th March 2016

2 BIS, Business statistics by regions and countries of the UK. Number of SMEs in the UK calculated at 5,384,000 in 2015

3 Please note the research focussed on awareness of benefits - not all businesses surveyed would be eligible for tax reliefs identified in the research

For further information please contact:
Citigate Dewe Rogerson
Antonia Green
Tel: 020 7282 2967
Email: antonia.green@citigatedr.co.uk

Direct Line Group
Jade Trimbee
PR Manager
Tel: 01372 839 452
Mobile: 07825 315 931
Email: jade.trimbee@directlinegroup.co.uk

Direct Line for Business

Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone or on-line.

Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line for Business and U K Insurance Limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line for Business products or get a quote by calling 0345 301 4827 or visiting www.directlineforbusiness.co.uk

Small Business Insurance Press Release

ADDED: 28th April 2016

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