Figures suggest government’s contrived tax system is tripping SMEs up and needs to be simplified, urges UHY Hacker Young
SMALL BUSINESSES have come under fire from HM Revenue & Customs as part of crackdown on payroll tax mistakes,
The errors made by SMEs account for over half of the taxman’s £737m haul from investigations into companies over tax avoidance and employer compliance errors.
National accountancy group UHY Hacker Young claims SMEs have been hit particularly hard by the clampdown on payroll tax mistakes, making up some £373.4m of the additional sums collected in the 2014/2015 tax year, despite SMEs being responsible for only 11% (£96bn) of total UK payroll.
Larger businesses paid a lower figure (£363.9m) in comparison to smaller firms, despite large companies making up 89% of total UK payroll (£726bn).
Hacker Young argues that SMEs do not have the finances and resources available to receive advice on tax issues, meaning they stand at higher risk of making mistakes when it comes to filing complicated employer compliance tax returns.
Roy Maugham, tax partner at UHY Hacker Young, said: “SMEs are being chased for a totally disproportionate amount of underpaid payroll tax, compared to their larger counterparts. But much of the underpaid tax is due to genuine errors. This strongly suggests the government needs to simplify its systems to help SMEs avoid mistakes.
“Investigations can be extremely disruptive to SMEs – as well as expensive. While some may be actively looking to avoid paying tax, in their vast majority, SMEs will simply be tripping up on a complex tax system,” continued Maugham.
Hacker Young’s research comes as business groups have refreshed their criticism towards the government’s apprenticeship levy, who have already labelled it as ‘payroll tax’.
The government is refusing to rule out an increase on the apprenticeship levy in order to help meet the chancellor’s deficit-reduction targets. The apprenticeship levy will come into force from next April, and will currently be charged at a rate of 0.5% on employer’s total payroll which exceeds £3m.
“There seems to be a very real danger that the government will increase the apprenticeship levy to replace other elements of support to FE and training for the unemployed. This levy acts as a kind of crude payroll tax and would force businesses to minimise loss by reducing wages or hiring fewer employees, hurting the lowest skilled the most,” said a spokesperson from the Institute of Economic Affairs.