VAT revenue made up 49% of the additional tax take from SMEs following HMRC investigations into SME tax compliance
VAT revenue made up 49% of the additional tax take from SMEs, following HMRC investigations into SME tax compliance. The total number of VAT collected increased from last year, when it made up 45%.
SMEs should ensure tax compliance to avoid disruptive, costly and time-consuming HMRC investigations. As there are a small number of SMEs that aim to avoid tax, HMRC will likely continue scrutinising SME’s tax returns, and those who make minor mistakes may find them magnified.
Earlier this year PfP revealed that HMRC would use two newly created teams at HMRC: the Individuals & Small Business Compliance unit, and the Wealthy & Mid-sized Business Compliance unit, to investigate SME VAT.
Kevin Igoe, Managing Director of PfP, comments: “Over the years HMRC has widened its net – cracking down on smaller businesses, as well as larger organisations.”
“It’s clear from the high tax take that HMRC have found investigations into SMEs to be fruitful, and therefore it is likely that this focus on smaller organisations will continue. In order to avoid scrutiny from the revenue, SMEs must make sure they are filing their returns correctly, so as not to incur a hefty fine.”
“VAT can rake in a lot of extra revenue for HMRC, and therefore the taxman is prepared to use all means at its disposal.”
“This will include the use of its Connect database and taskforces to identify those it suspects may be underpaying on their tax as well as more aggressive tactics such as APNs and property raids.”