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The tax yield from compliance investigations into small and medium-sized enterprises (SMEs) is up by more than a third, as HMRC continue their efforts to close the tax gap.
The department netted £434m in 2011/12 from fines and tax on top of that already paid, marking a 39% rise on the £311m collected during the 12 previous months, according to research from UHY Hacker Young.
The sharp increase shows how SMEs have become an easy target for the Revenue’s efforts to boost the annual tax yield, claimed the accountancy group’s tax partner Roy Maugham.
“Small businesses are more likely to make innocent errors in their tax calculations than larger businesses, meaning [they offer] plenty of opportunity for HMRC.”
Money isn’t the only cost to SMEs of Revenue inquiries There are also adviser fees and the amount of time it takes to deal with an investigation – to which many firms will concede, unnecessarily, and find themselves having to pay extra tax, warned Maugham.
He added, “Add this to HMRC’s tactic of sending multiple demands for additional payment for different taxes simultaneously, and small businesses can very quickly find themselves overwhelmed by the compliance burden.”
Maugham believes the taxman is looking more closely than ever at issues like corporate entertainment, while inspectors’ take on employee benefits such as company cars and private healthcare is “increasingly draconian. They’re looking for any minor compliance slip by a business.
“The days of HMRC having a relaxed approach to assessing deductions are long gone,” he concluded.
