Small businesses feel penalised by “intensive” HMRC investigations

Research commissioned by HMRC revealed discontent among smaller businesses around the nature of HMRC’s tax investigations.

The research showed that 52% of small businesses find HMRC tax investigations to be too intensive, and 56% said they did not believe that HMRC attempted to minimise disruptions caused by the cost, time and effort required by the inquires.

Insurance firm PfP said that smaller businesses are disproportionately affected by HMRC investigations, as they can be hugely disruptive and a massive strain on much needed resources and funds.

The research also said that 48% of businesses do not believe HMRC’s penalties are fairly distributed, and that smaller businesses are unfairly targeted.

Kevin Igoe, Managing Director at PfP, said: “Small businesses think they are getting rough treatment from HMRC and are making this clear.”

PfP said that smaller businesses are often targeted as their reduced resources mean they are less able to negotiate with tax inspectors and manage the inquiries. Furthermore, HMRC nets large amounts of extra tax from investigations into smaller businesses.

The firm said this was evidenced by the fact that the investigation units at HMRC that focus on small businesses and individuals collected an additional £16 in taxes for every £1 spent on their investigatory staff in 2016/17.

Igoe added: “Although some small businesses responded positively when asked about their impressions of HMRC’s investigations, we need to get to a point where an overwhelming majority are happy with what’s happening.”