HMRC collects an extra £3.4bn from SMEs in underpaid VAT

HMRC collects an extra £3.4bn from SMEs in underpaid VAT

VAT revenue made up 49% of the additional tax take from SMEs following HMRC investigations into SME tax compliance

HMRC collected an extra £3.4bn from SMEs in VAT underpayment in 2016-2017 as part of a crackdown on tax evasion, according to PfP, tax investigation insurance experts.

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.”

Brexit has rendered the future of VAT uncertain, as it is not clear whether the government will plan to raise or lower the current rate of 20%.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

3m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

4m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

5m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

5m

Related Articles

The ‘genuinely self-employed’ need not fear IR35 changes

HMRC The ‘genuinely self-employed’ need not fear IR35 changes

5h Tom Lemmon
FRC announce HMRC CEO Jon Thompson as replacement for Haddrill

HMRC FRC announce HMRC CEO Jon Thompson as replacement for Haddrill

3d Tom Lemmon
IR35 - HMRC scrutinising where TV presenters stand and choice of clothes for tax purposes

HMRC IR35 - HMRC scrutinising where TV presenters stand and choice of clothes for tax purposes

6d Chris Jewers
Struggles faced by sole traders revealed by HMRC tax record study

Business Struggles faced by sole traders revealed by HMRC tax record study

2w Chris Jewers
HMRC collects £37bn from new taxes introduced during the last decade

HMRC HMRC collects £37bn from new taxes introduced during the last decade

2w Chris Jewers
Taxpayers frustrated as HMRC toughens late self-assessment stance

HMRC Taxpayers frustrated as HMRC toughens late self-assessment stance

2w Dave Beach
HMRC loses £13.2bn in tax to criminals 

HMRC HMRC loses £13.2bn in tax to criminals 

1m Dave Beach
Phone security expert lauds HMRC’s response to scam surge

HMRC Phone security expert lauds HMRC’s response to scam surge

2m Dave Beach