Deductions and capital allowances SMEs commonly miss

The aim of good tax planning is not to avoid tax. It is to pay exactly what is due and no more. In practice, SMEs often overpay because expenses are not recorded properly, or because assets and allowances are never claimed.

Areas commonly missed

1. Capital allowances. When you buy equipment, vehicles or machinery, the cost is not deducted in one go but is generally recovered through allowances over time. Many small businesses either expense these items incorrectly or never claim the allowance. Keep a fixed asset register with purchase dates and costs.
2. Bad debts. Debts that have genuinely become irrecoverable may be deductible, but you need to show that you took reasonable steps to collect. Keep a record of reminders and follow-up.
3. Interest on business borrowing. Interest on funds used to earn business income is often deductible. Keep loan agreements and evidence of how the funds were used.
4. Staff costs. Salaries, employer contributions and certain staff training costs are commonly deductible, provided payroll and PAYE compliance is in order.
5. Assessed losses. A tax loss in one year can often be carried forward against future profits, subject to conditions. Many businesses do not track these properly.
6. Repairs and maintenance. These are generally deductible, but improvements that add to an asset’s value are treated differently. Record what the spend actually achieved.
7. Professional fees. Audit, accounting and some legal fees related to running the business are often deductible.

Where SMEs go wrong in the other direction

Claiming personal expenses, owner’s drawings or unsupported cash payments as business costs can trigger penalties and interest. The safest approach is complete records and a clear line between business and personal spending.

Multi-currency issues

If you trade in USD and ZiG, expenses must be translated consistently and documented. Inconsistent conversion is a common source of disputes.