Verastar reports on new research, which indicates that UK-based small to medium-sized enterprises (SMEs) are unaware of the tax relief they can potentially claim under British law.

Understanding of tax relief

British businesses can receive a variety of reliefs and allowances for tax purposes. For instance, all UK limited companies are required to pay 20% corporation tax on their taxable profits to HM Revenue & Customs (HMRC), the government’s tax department. However, there are allowances and reliefs which limited companies can offset against their taxable profits to lower their corporation tax expenses.

Yet a study conducted by Direct Line for Business, a business insurance provider, indicates that nearly half (46%) of British SMEs have a “very poor” understanding of government tax relief. This amounts, according to Direct Line for Business, to almost 3.5 million UK SMEs which could be failing to utilise the government’s business tax relief system effectively.

Deeper research analysis

When it comes to SME understanding of available tax relief, results vary across the board. Only 6% and 5% of respondents said they had a “very good” or “above average” understanding of government tax relief respectively. Just shy of one in five (18%) SMEs questioned fell into the “average understanding” category, while the same number admitted they have a “below average” comprehension of the business tax relief measures they are eligible to claim from HMRC.

Direct Line for Business also examined SME comprehension of specific tax relief measures. Just above one in ten (13%) respondents knew they qualified for the small business rate relief, while 14% knew they were eligible to receive corporation tax marginal relief and 15% knew that capital allowances applied to their ventures. Also, 36% of SMEs surveyed admitted that they did not know of any tax relief measures for companies, while 7% said they did not qualify for any tax reliefs or allowances.

Maximising SME revenue

Elaborating, Direct Line for Business Head Nick Breton noted: “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… SME owners do not 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.”

By failing to educate themselves on tax relief issues, SME owners are missing out on millions in additional revenue. For instance according to Small Business, research carried out by Free Agent showed that UK micro-business owners collectively deprive their companies of almost £250 million per year, by failing to claim relief on expenses worth up to £10. Commenting on these findings, Free Agent CEO Ed Molyneux stated: “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.”

In order to cultivate a thriving enterprise, SME owners would be advised to devote every penny possible to maintaining and expanding their business. Therefore, SMEs need to develop a broad understanding of the government tax reliefs and allowances available to their companies, even those worth as little as £10 or less, to ensure they can maximise essential capital for business purposes.


Verastar is a leading provider of essential business services to micro SMEs, operating under the following brands: kinex, Clear Business Water, Titan Telecom, Marble Telecom, Economy Gas and 118777 Limited. Our business model is focused on providing a spectrum of consolidated services that disrupt traditional markets and create great savings, efficiencies and value for our customers.