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HMRC Amps Up SME Compliance Activities

by Robert Lee,, London

28 March 2016

HM Revenue and Customs (HMRC) collected an additional GBP470m (USD6661.1m) from investigations into the tax affairs of UK small businesses (SMEs) in 2014-15, according to research by accountancy group UHY Hacker Young.

UHY Hacker Young said that SMEs could be seen as a "soft target" for HMRC because budgetary constraints mean that small businesses do not tend to have tax specialists in-house, making it harder for them to challenge tax bills they regard as unfair or inaccurate. The group pointed out that the tax take from investigations into large businesses fell by 13 percent last year, from GBP4bn in 2013-14 to GBP3.5bn in 2014-15.

Roy Maugham, Tax Partner at UHY Hacker Young, said: "Small businesses have already felt the effects of the tax man's tougher approach to compliance, and the target to bring in billions more may lead to HRMC squeezing every pound it can from SMEs. 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 tax man will lead to substantial costs and protracted disruption."

According to UHY Hacker Young, recent HMRC research revealed that late payment of tax by SMEs is most often induced by poor administration, cash flow problems, and the late payment of debt. UHY Hacker Young added that HMRC is establishing a wider range of specialist taskforces, designed to build on and upgrade the operations of its regional offices, 170 of which face closure. It warned that this could lead to still greater administrative burdens being placed on SMEs.

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."

"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 [from] the taskforces – and the prospect of an undoubtedly unwelcome fine."

TAGS: compliance | tax | small business | business | tax compliance | United Kingdom | tax authority | small and medium-sized enterprises (SME) | HM Revenue and Customs (HMRC) | revenue statistics | HM Revenue and Customs (HMRC)

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