However, many who had to have meetings with the tax authority said they found the experience more helpful and less frightening than they at first expected. Small businesses say that they are often frustrated because they cannot get clear information from HMRC.
Indeed, a quarter said they incurred problems trying to get clear answers to tax questions, 30 per cent had problems understanding the information they were given and just 45 per cent said they had confidence in the answers members of HMRC’s staff gave them.
The research was carried out for HMRC and The Office of Tax Simplification by The Futures Company. It found that small companies are constantly worried about making mistakes with tax repayments that could lead to the taxman breathing down their necks.
The Daily Telegraph reported a section of the research which said: “Whilst many have experienced no problems, some small businesses can be disappointed in the quality and clarity of the response they get to questions from HMRC. This can cause significant frustration and increase reliance on other advisers.”
The study comes as part of the HMRC’s review of processes. The authority is looking for ways in which it can make its service more helpful and its processes easier to understand for small companies and sole traders.
Just under half of small businesses questioned said that their biggest fear is getting tax calculations wrong even though they keep their records in order, while 38 per cent were worried about getting fined for errors in their accounting.
Many firms said that they had difficulty knowing what they can claim as a business expense and when tested 42 per cent gave the wrong answer.
According to the report, horror stories about inquiries and fear of penalties made small business owners 'overly anxious'. Levels of anxiety are lower – although still significant – for those using an agent to help with tax administration, and, while confidence grows, 'the fear of HMRC remains throughout the lifetime of a business'.
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Susie Hughes © Shout99 2012