Subscribe Via RSSSMEs Bear the Brunt of HMRC Affluent Unit Crackdown
It’s important for all SMEs to be aware of the risks they face if their tax affairs are not in order, because SMEs are increasingly on HMRC’s radar.
You might be surprised to learn that HM Revenue and Customs (HMRC) recruitment of an additional 100 tax inspectors to its Affluent Unit (the team’s remit is to examine the tax affairs of those with more than 1 million in private wealth) has actually lead to small businesses bearing the brunt of HMRC’s crackdown on tax evasion as the amount raked in from small businesses jumps 31 percent.
- The taxman raked in 565million during 2012-13, up from 434m in 2011-12. All from small businesses caught out by compliance rules. That is 31% up from the previous 12 months.
A tougher stance on UK tax evasion has been implemented, resulting in HMRC turning up the heat on start-ups, small and medium enterprises (SMEs) which are bearing the brunt of the much-publicised crackdown on international giants like Google and Starbucks.
With an ambitious target set by the Chancellor to bring in billions of pounds through additional compliance, HMRC is desperate to squeeze as much money as they can from businesses who may owe tax.
As most SMEs have relatively small budgets compared to companies like Starbucks they are less likely to have accountants to manage their finances, and are therefore prone to making simple mistakes when filling in returns. This makes them an easy target for HMRC.
The lack of financial and legal representatives also means SMEs are in a weaker position to negotiate over allegations of underpaid tax than the big corporates. Of course, HMRC denies singling out small businesses as an easier target and says the results are due to improved IT facilities.
In the 2010 Spending Review, Chancellor of the Exchequer George Osborne set a target to net an extra 7 billion a year in additional tax revenues from compliance activity. As a result, HMRC has instigated specialist taskforces to investigate businesses and individuals.
An HMRC spokesman said: “Of the UK’s 4million small enterprises, the overwhelming majority pay the right tax at the right time. We recognise the crucial role SMEs play in creating growth and contributing to the UK’s economy, which is why we work hard to help them to get their tax right from the outset.
The vast majority of taxpayers, including the wealthiest, play by the rules and we are acting in their interests by taking firm action against the minority that don’t.”
HMRC confirmed: ‘We launched 12 taskforces in 2011-12 which have recovered more than 55 million to date and are expected to bring in over 70 million in total. We launched a further 28 taskforces in 2012-13 and we will launch up to 30 more in 2013-14 and 2014-15.’
- It’s important for all SMEs to be aware of the risks they face if their tax affairs are not in order, because SMEs are increasingly on HMRC’s radar.
Know Your Tax Obligations: How to Avoid Falling Foul of UK Tax Laws
HMRC has released the following top tips for small businesses:
- Keep proper books and records which accurately show all business transactions.
- Include all income from the business including cash and card receipts.
- Claim all reasonable business expenses but don’t claim for private expenses which don’t relate to the business.
- Check your tax return carefully before you submit it – never send in a return which you know is inaccurate.
- If your returns are accurate we are very unlikely to query it.
For more information on how to sort out your tax visit https://www.gov.uk/sortmytax
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