1st September 2008
Many small businesses do not take advantage of tax breaks on business equipment, a Government survey of SME finances has found.
The survey, commissioned by the Department for Business Enterprise & Regulatory Reform (BERR) and conducted by Cambridge University's Centre for Business Research (CBR), found that only a third of respondents were aware of existing capital allowances. Just 9% claimed the allowances, and even fewer claimed tax breaks for investing in green assets.
Companies can claim capital allowances for the cost of plant and machinery such as vehicles, tools, computers and business furniture. Medium-sized firms can claim 40% of the expenditure on such items in the year of purchase, and small businesses 50%.
The BERR survey also reported a decline in the use of external finance, from 81% of firms in 2004 to 69% in 2007. This was despite 56% of the businesses surveyed having sought new or extended overdrafts during the past three years, compared to 32% between 2001 and 2004.
Some 29% of respondents seeking finance in 2007 were wholly or partially rejected, compared to 26% in 2004. Ten percent of firms were rejected when applying for new or extended overdrafts and 16% were denied credit cards.
The Forum of Private Business' director of finance and administration, Nick Palin, said "It is important that the Government streamlines the [allowances] application process and that small firms consider switching banks, or seek out the alternative funding streams.
"Businesses are also not cutting costs where they could – for example, £200 million in small business rate relief goes unclaimed each year."
Palin also said that "the credit crunch has made accessing finance much more difficult". However, the CBR found that "the majority of firms said that there had been no change in the ease of obtaining finance and 71% of those seeking new finance received all that they sought".
Small firms 'not taking advantage of tax breaks'
The survey, commissioned by the Department for Business Enterprise & Regulatory Reform (BERR) and conducted by Cambridge University's Centre for Business Research (CBR), found that only a third of respondents were aware of existing capital allowances. Just 9% claimed the allowances, and even fewer claimed tax breaks for investing in green assets.
Companies can claim capital allowances for the cost of plant and machinery such as vehicles, tools, computers and business furniture. Medium-sized firms can claim 40% of the expenditure on such items in the year of purchase, and small businesses 50%.
The BERR survey also reported a decline in the use of external finance, from 81% of firms in 2004 to 69% in 2007. This was despite 56% of the businesses surveyed having sought new or extended overdrafts during the past three years, compared to 32% between 2001 and 2004.
Some 29% of respondents seeking finance in 2007 were wholly or partially rejected, compared to 26% in 2004. Ten percent of firms were rejected when applying for new or extended overdrafts and 16% were denied credit cards.
The Forum of Private Business' director of finance and administration, Nick Palin, said "It is important that the Government streamlines the [allowances] application process and that small firms consider switching banks, or seek out the alternative funding streams.
"Businesses are also not cutting costs where they could – for example, £200 million in small business rate relief goes unclaimed each year."
Palin also said that "the credit crunch has made accessing finance much more difficult". However, the CBR found that "the majority of firms said that there had been no change in the ease of obtaining finance and 71% of those seeking new finance received all that they sought".
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