Receipts soar from SME tax investigations
HMRC’s tax receipts from investigations into small and medium-sized businesses have increased by 31% in the last year, according to figures obtained by accountancy firm UHY Hacker Young.
“Compliance” investigations into SMEs raised £565m for HMRC in 2012-13, up from £434m in 2011-12 (year ending March 31), Hacker Young said.
In the 2010 Spending Review, the Chancellor set a target to net an extra £7bn a year in additional tax revenues from compliance activity.
“Small businesses are bearing the brunt of HMRC’s tougher approach to tax investigations,” said Roy Maugham, Tax Partner at UHY Hacker Young.
Small and medium-sized businesses are often less likely to have accountants to manage their finances, making them prone to mistakes when filling in returns and therefore an easy target for HMRC, Maugham said.
“That also means they are in a weaker position to negotiate over allegation of underpaid tax than a big corporate.”
Since 2010, HMRC’s taskforces have focused on tax evasion in sectors of the economy ranging from medics and plumbers to restaurant owners and door-to-door sales people.
HMRC said its tax taskforces have raised more than £80m since 2011. It expects to bring in more than £90m per year from new taskforces launched over the next three years.
The Revenue added that the targeting of different industries is a smart use of resources, but some tax experts question whether modest returns from some campaigns are worth the effort.
The taskforces are part of £917m in funding from the government spending review to tackle tax evasion, avoidance and fraud from 2011/12.