HMRC raised nearly half a billion pounds from investigations into the tax affairs of small businesses last year, according to data revealed by UHY Hacker Young following a freedom of information request, which warns that the introduction of specialist taskforces is likely to see scrutiny increase further
According to the firm’s analysis, the tax take from investigations into small businesses hit £470m last year, while the takings from large business tax probes fell by 13% last year, from £4bn to £3.5bn.
SMEs are a soft target for HMRC because budgetary constraints mean small businesses do not tend to have tax specialists in-house, making it harder for them to challenge tax bills, the firm warned.
Roy Maugham, tax partner at UHY Hacker Young, said: ‘Small businesses have already felt the effects of the taxman's tougher approach to compliance, and the target to bring in billions more may lead to HRMC squeezing every pound it can from SMEs.
‘As well as being more likely for SMEs to make a mistake when it comes to their taxes, they are also less likely to effectively negotiate if they disagree with HMRC's demands as they will feel out of their depth and fear arguing with the taxman will lead to substantial costs and protracted disruption.’
UHY Hacker Young adds that as part of its drive to improve its compliance take from small business, HMRC is putting in place a wider range of specialist taskforces with a focus on the sector.
Maugham said: ‘HMRC is on a drive to increase tax-take. Its methods have changed in order to achieve this - it now focuses on specific subsectors, and even on specific issues like corporate entertainment.’
UHY Hacker Young says research suggests that late payment of tax by SMEs is most often the result of a combination of poor administration, cashflow problems, and general coping strategies whereby debts are not paid until they have been chased several times.
Maugham said: ‘The Revenue can, on occasion, be understanding and accommodate requests for extensions to tax payment deadlines for example. Under the new system, however, small discrepancies will be far more likely to trigger an investigation.
‘SMEs are highly advised to try and get their books in order and make payments within the requested time period in order to avoid a visit for the taskforces - and the prospect of an undoubtedly unwelcome fine.’
