Tax & admin Praseeda Nair · 12 September 2017
HMRC targets small businesses in tax avoidance crackdown
Small business owners have been urged to improve their record keeping, as a new reportreveals HMRChas tightened its grip on tax avoidance by increasing investigations into theuK’s smallest firms. Research from accounting group UHY Hacker Young revealed HMRC collected an additional 474m in corporation tax from small business owners as a result of investigations in the 2016/2017 tax year a year-on-year increase of five per cent. The figures arrive as the tax office comes under growing pressure to close Britan’s so-called tax gap. HMRC’s most recent official estimate, from October 2016, claimed 3.7bn of corporation tax was left uncollected in 2015. UHY’s latest report claimed the tax office was [turning the] spotlight onto small businesses, having struggled to navigate the powerful in-house tax and accounts departments of the country’s largest firms. Commenting on the report, Roy Maugham a tax partner at UHY, said HMRC’s singling out of smaller firms for investigation was unfair. Maugham said the consequences of an investigation were most severe for owners of smaller companies, who may not have the resources needed to bounce back. He added: ‘small and medium sized businesses have not been top of HMRC’s agenda in the past, but that is now beginning to change as HMRC are under pressure to recover increasing amounts of tax. Maugham warned that HMRC was not afraid to pull companies up? and urged owners to do everything they could do avoid small mistakes on their tax returns. Sounding the alarm for founders, Phil Sayers, a director at accounting software provider Clear Books, said small business owners should be concerned? by the report. Explaining the approach being taken by HMRC, Sayers warned that small business owners even accidental? understating their earnings could face severe penalties from the tax office. He added: HMRC can backtrack several years into their financial affairs, which can be both hugely time consuming and the penalties that could be imposed could be quite onerous. So for an SME that gets it wrong, even accidentally, it can cost them a lot of money.
ABOUT THE EXPERTPraseeda Nair
Praseeda Nair is an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.