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One large accountancy firm predicted that SMEs could come under even greater scrutiny as the taxman looks to raise tax take further still by shifting its focus from investigations into larger businesses – to smaller businesses.
Tax take from investigations into large businesses fell by 13 per cent up to the year end march 2015, from £4bn to £3.5bn.
Soft target
UHY Hacker Young said that SMEs can be a soft target for HMRC because budgetary constraints mean small businesses do not tend to have tax specialists in-house, making it harder for them to challenge tax bills presented to them by HMRC that they see as unfair or inaccurate.
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“As well as being more likely for SMEs to make a mistake when it comes to their taxes, they are also less likely to effectively negotiate if they disagree with HMRC’s demands as they will feel out of their depth and fear arguing with the taxman will lead to substantial costs and protracted disruption.”
Specialist taskforces
As part of its drive to improve its compliance take from small business, HMRC is putting in place a wider range of specialist taskforces, designed to build-on and upgrade the operations of HMRC’s regional offices – 170 of which face closure.
By concentrating resources on a particular sector, taskforces will aim to quickly and efficiently identify, investigate and enforce unpaid tax collection by SMEs. Specialist task forces could see smaller businesses face even greater administrative burdens – while those coming under investigation could see their day-to-day operations disrupted even further than before.
Roy Maugham, said: “HMRC is on a drive to increase tax-take. Its methods have changed in order to achieve this – it now focuses on specific subsectors, and even on specific issues like corporate entertainment."
HMRC has recently carried out research into the tax behaviours of small businesses, confirming these as healthy sources of additional tax take. It found that late payment of tax by SMEs is most often induced by:
- poor administration;
- cash flow problems; and
- general coping strategies whereby debts are not paid until they have been chased several times.
Mr Maugham said: “The Revenue can, on occasion, be understanding and accommodate requests for extensions to tax payment deadlines for example. Under the new system, however, small discrepancies will be far more likely to trigger an investigation.
“SMEs are highly advised to try and get their books in order and make payments within the requested time period in order to avoid a visit for the taskforces – and the prospect of a undoubtedly unwelcome fine.”
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Susie Hughes © Shout99 2016
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