Failure to claim vehicle expenses could hurt small business profits as business travel picks up
- 2 million small business owners do not report insurance, road tax and fuel expenses
- 85% of people prefer to meet in person because it allows them to build stronger and more meaningful business relationships. Therefore, failure to claim after the restrictions are lifted could affect the overall financial health of SMEs.
The reluctance of small business owners to claim vehicle expenses could hurt future profits, as millions return to travel for business purposes after lockdown restrictions are lifted.
While Zoom’s legacy is here to stay, millions of workers have returned to the workplace, resulting in tax-deductible business costs. However, failure to claim insurance, fuel, repair and parking costs by SMEs can potentially reduce profits, according to a study by The Accountancy Partnership on Business Owners’ Understanding of Business Expenses. ‘company.
It is unlikely that a third of small business owners (or two million) will claim vehicle expenses because they don’t know what is considered legitimate, which means they will not receive significant tax breaks in the future. a time when SMEs are already experiencing enormous financial difficulties. .
85% of people prefer to meet in person because it allows them to form stronger and more meaningful business relationships, and 77% appreciate the ability to read body and facial expressions, demonstrating the appetite for in-person meetings now that the restrictions allow them to.
Lee Murphy, Managing Director of The accounting partnership noted: “As with many HMRC expense policies, the rules for claiming vehicle expenses can be complicated. There are different rules for sole proprietorships and limited liability companies when it comes to vehicle expenses, which can be confusing and deter business owners from claiming, thereby putting the financial health of their business in jeopardy. danger.
Research from the Accountancy Partnership found that 44% of small business owners who don’t report their expenses do so because they don’t know what can be considered legitimate or are concerned about the risk of penalties. Another 41% “don’t have time” or “can’t be bothered” to report their expenses.
Lee continued: “During the pandemic, when business travel was at a minimum, business owners may have refrained from claiming minimum miles because it was seen as not worth the time, but as they start to travel more, the money that could be recovered will accumulate. more important are.
“Business owners can claim 45 pence per mile for the first 10,000 business miles when they or their employees use their own car. If the entire 10,000 business mile allowance were used, owners could claim £ 900 VAT per person per year.
“Vehicle costs are not limited to kilometers – vehicles, insurance and road tax can also be claimed. Failure to claim them, along with other business-related costs, can leave businesses with larger tax bills than necessary, which can hurt overall profitability.
“Although expenses can sometimes be a minefield to negotiate, it is always worthwhile to claim reimbursement for all reasonable costs resulting directly from the business activity. Finance professionals have extensive experience and knowledge when it comes to HMRC policies, so it’s always worth consulting with your accountant or bookkeeper if you are unsure of what qualifies.