North West business owners missing out on potential HMRC payouts

Nearly one in four business owners fail to take advantage of retrospective claims and less than half of North West businesses ask for advice on making claims.

Business owners across the North West could be missing out on thousands of pounds in tax refunds, as nearly one in four (23%) to claim tax back on a retrospective basis, according to research commissioned by RSM Tenon, the seventh largest accountancy firm in the UK.

RSM Tenon’s Business Barometer, which questioned 300 business owners across the UK at the end of January 2010, shows that:

• 18% of North West business owners never revisit their tax returns once they are filed
• 15% in the region are unaware of the time limits relating to retrospective claims
• 5% of business owners in the North West are unaware they are able to make retrospective claims

In addition, only 42% of North West business owners take advice on the elements they are able to claim back on a retrospective basis.

The Barometer research is timely, as it suggests that many businesses will not take advantage of the recent opinion by the EU Advocate General (AG), expected to be upheld by the European Court of Justice, entitling UK firms to claim back VAT payments on entertainment expenses retrospectively for up to four years.

Currently, a business cannot reclaim VAT on ‘business entertainment’ but can claim it back on ‘subsistence’. Entertainment is defined as any kind of free or subsidised entertainment or hospitality to non-employees. It is the opinion of the AG that the definitions of ‘entertainment’ in VAT laws do not meet EU regulations.

Subsequently, RSM Tenon recommends that businesses review their position on entertaining expenses as a matter of urgency, as filing a protective claim could line businesses up for a windfall VAT rebate. Furthermore business owners should consider protecting their position by submitting claims or extending existing claims, up to and including four years from when the original claim is filed.

John O’Mahony, Head of Tax in the North West at RSM Tenon, said: “Although it’s tempting not to think about a year once it has been put to bed and all returns have been made, it is worth revisiting when opportunities come along, especially in the current economic climate where cash flow is still tight. We are urging all businesses in the North West to dust off their old VAT returns and seek advice on whether they can potentially make a claim.

“This should be good news for businesses, and HMRC should be bracing itself for a deluge of retrospective tax claims. Businesses must take action – it is an excellent opportunity which has come at a time when they are facing tighter regulations and higher tax payments.”