HMRC plans to lessen the burden of audits and inspections via a raft of proposals. These include a strategic risk analysis system to reduce the burden on compliant businesses.

‘This will allow all data held by HMRC to be actively matched and profiled to identify high-risk customers,’ said HMRC.

The move to make interventions more targeted has been welcomed by the small business community.

‘Anecdotal evidence suggests that these audits were often unnecessary, intrusive and unfair. In light of this revamping of the inspection process would be welcome,’ said Phil McCabe of the Forum of Private Business.

In a review of its small business policy, the department admits its traditional response for suspected non-compliance was too general. It has pledged to reduce by 15% the time spent on auditing and inspecting businesses found to owe less than £1,000.

‘This ‘one-size-fits-all’ approach could be disproportionately burdensome in some cases, particularly for those who try to comply, but make mistakes,’ said HMRC.

HMRC is trialling integrated ‘interventions’ for taxes on profits, PAYE and VAT, rather than separate interventions on each tax area.

‘If there is a more general attitude to helping small firms make sure they know how to meet their obligations then that’s something we support,’ says Simon Briault of the Federation of Small Businesses.

New penalties will come into place next April with higher fines for those deliberately falsifying tax returns, suspended ones for businesses who take insufficient care to get it right and no fines for those who take care, but make ‘unintentional’ errors.

The department said this was in response to business concerns that ‘tax evasion creates unfair competition’.