Small businesses breathed a sigh of relief when they heard that the taxman was busy making life easier for them. But, as ever, there may be a sting in the tail.

Inspections and audits are to be more focused, the taxman has pledged. Only high-risk companies are to be targeted. But how will those risks be assessed?

HM Revenue & Customs is compiling a database enabling it to profile businesses that are likely to break the rules.

The fear is that companies could end up on a black list for making mistakes which might look as if they were committed on purpose.

‘The tax affairs small businesses have to look after are complicated. They themselves don’t always fully understand it and they make unintentional mistakes that could be misconstrued as a deliberate thing.

‘I find it difficult to believe this database could iron this out,’ says Simon Briault of the Federation of Small Businesses.

The trade association is concerned the tax office could put businesses in the wrong category. ‘People within HMRC need to understand what the level of expertise is in the typical small business when it comes to resolving tax issues; in other words, it’s pretty low,’ says Briault.

However, the tax office said it was not its ‘intention to build a high rise database’ but to focus on the way it identifies risks.

It is piloting early and more open communication over interventions in several offices. Alongside this it has trained up staff as general practitioners who can act knowledgeably on all types of levies, whether it’s tax on profits, PAYE or VAT.

Obviously, the expectation is that better advice from the tax office will equate to fewer errors on returns.

However, the Federation is not so sure and believes it would help if tax officials actually had a go at running a small business themselves.

‘There needs to be the understanding that small businesses do not have an in-house tax counsellor or an army of accountants,’ says Briault.