HMRC snaffled an additional £470m from probes into the tax affairs of small businesses last year, according to data gleaned by UHY Hacker Young.
The firm has warned SMEs that they could come under greater scrutiny as the taxman looks to up its tax take by shifting its focus from investigations into larger businesses to smaller players.
The tax take from inquiries into large businesses fell by 13%, from £4bn to £3.5bn, in the year end 31 March 2014/15.
Top 20 firm UHY Hacker Young posits that “SMEs can be 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 presented to them by HMRC that they see as unfair or inaccurate.
Roy Maugham, tax partner at UHY Hacker Young, says: “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.”
The firms says 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, designed to build-on and upgrade the operations of HMRC’s regional offices – 170 of which face imminent closure.
By focussing resources on a particular sector, taskforces will aim to quickly and efficiently identify, investigate and enforce unpaid tax collection by SMEs, the firm says.
Maugham adds: “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.”
Late payment of tax by SMEs is most often induced by poor administration and cash flow problems, it found.
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