Tax authority HMRC could face fresh criticism that its efforts to plug the UK’s tax gap works unfairly against small businesses, as it continues to compensate for non-compliance.
Compared to previous year, an extra 468m was generated in tax revenue by small businesses in 2016, as HMRC attempts to close the tax gap that saw a reported 18.3bn in tax revenue from smaller firms go uncollected by the agency in 2015.?
The figure was obtained as part of a Freedom of Information (FOI) request by accountancy network UHY Hacker Young.
The tax gap disproportionate approach?
In December 2015, HMRC declared that Britain had an annual tax shortfall of 36bn, with small firms accounting for over half of the figure. HMRCdrew criticism from tax experts that it continued to ignore the activity of companies such as Google and Apple.
The parliamentary public accounts committee responded to HMRC’s figure with a report that highlighted its failure to address tax fraud from the top: HMRC’s assessment of the tax gap shows that the level of tax fraud has remained virtually static over the last five years.
Committee chair Margaret Hodge stated that the priorities of the tax office remained in favour of international corporations.
hMRC still focuses too much on small businesses the easy wins and lets the big multinationals off the hook.
Roy Maugham, a tax partner at UHY Hacker Young, warned that HMRC’s pursuit of small firms added to existing burdens on owners.
there is increasing pressure on small and mid-sized businesses to spend their time and money on systems to ensure that tax affairs are accurate and up to date, ” he said in a statement.
With the self-assessment deadline soon hitting on 31 January, Maugham added that owners needed to make sure all bookkeeping and finances were in order or else leave their company open to HMRC action.
without adequate care, small businesses are at risk of being pulled up over minor mistakes or small disparities, which could incur disproportionately heavy fines and penalties.
Further new research from advice website InformI revealed that almost one in four small business owners had missed the January 31 tax deadline before. According to the study, the average fine levied against business owners was nearly 300, netting the government around 87m in immediate fines on February 1 alone in 2016.