Overly complex tax system is tripping up small companies

HMRC has collected an additional £737.3m from investigations into companies over tax avoidance and errors relating to employer compliance with small and medium-sized enterprises in particular coming under fire.

UHY Hacker Young said SMEs have been hit particularly hard by HMRC’s crackdown on payroll tax mistakes accounting for more than half (£373.4m) of the additional tax collected in 2014/15. This is despite them being responsible for only 11% (£96bn) of overall UK payroll. In contrast although larger businesses are responsible for 89% of payroll (£726bn) they paid just £363.9m in additional payroll taxes and penalties.

Roy Maugham tax partner at UHY Hacker Young said: ‘SMEs are being chased for a totally disproportionate amount of underpaid payroll tax compared with their larger counterparts. But much of the underpaid tax is due to genuine errors. This suggests the government needs to simplify the system...