HMRC hits ‘easy target’ small firms

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Small and medium sized businesses are an “easy target” and a significant area of HMRC’s cash drive activity, according to UHY Hacker Young.

The top 20 firm found via HMRC’s annual report and a freedom of information request that the extra tax yield from compliance investigations into small firms by HMRC had jumped 39% in the last year. On top of taxes already paid by these businesses HMRC took £434m in extra tax and fines in 2011/12, up from £311m in 2010/11.

Roy Maugham, tax partner at UHY Hacker Young, said in a press statement: “HMRC has been set a challenging tax yield target by the Chancellor, and small businesses have found that they are an easy target for HMRC’s crackdown.”

AccountingWEB got in touch with HMRC, who denied they were targeting small businesses.

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Robert Lovell
Managing Editor
AccountingWEB.co.uk
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24th Oct 2012 13:45

‘easy target’ small firms

To my thinking, HMRC would receive better results by employing people, from the unemployment register  if required, to tackle the problem at the root. Many small firms, and some not so small, are not even registered for self employment.

Recent cases impacting on my clients;

A hairdresser who could not compete with unregistered hairdressers in the vicinity.

A cleaning firm which was at a disadvantage from an unregistered cleaning firm with premises on the High street.

A plasterer who went out of business as he could not compete with Council workmen who were moonlighting.

These staff could call at premises where there are possible risks; scan newspaper adverts and those placed in shop windows or on lamp posts, asking for UTR numbers.

The mere fact that such a campaign were running would, no doubt, elicit many registrations. 

I have reported a few such firms to the Hot Line, but that appears to be fairly tepid.

 

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25th Oct 2012 13:01

small firms are an easy target-always have been

HUGH W DUNLOP wrote:

To my thinking, HMRC would receive better results by employing people, from the unemployment register  if required, to tackle the problem at the root. Many small firms, and some not so small, are not even registered for self employment.

Recent cases impacting on my clients;

A hairdresser who could not compete with unregistered hairdressers in the vicinity.

A cleaning firm which was at a disadvantage from an unregistered cleaning firm with premises on the High street.

A plasterer who went out of business as he could not compete with Council workmen who were moonlighting.

These staff could call at premises where there are possible risks; scan newspaper adverts and those placed in shop windows or on lamp posts, asking for UTR numbers.

The mere fact that such a campaign were running would, no doubt, elicit many registrations. 

I have reported a few such firms to the Hot Line, but that appears to be fairly tepid.

i can add to that a bunch of second car traders

 

 

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25th Oct 2012 10:11

Good Post

but nothing new or that we didn't already know. The battle will increase over the next year with VAT being hit. Domestics are already saying to builders etc. No 20% vat and we will give you cash and it's not just the small stuff anymore.

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25th Oct 2012 10:47

Consistency? hmm.

I wonder whether I can successfully quote back to them that they treat "customers" consistently regardless of size, and in the same breath mention Vodafone and Goldman Sachs in my negotiations.

With kind regards

Clint Westwood

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25th Oct 2012 11:38

Vodafone again

nogammonsinanundoubledgame wrote:
I wonder whether I can successfully quote back to them that they treat "customers" consistently regardless of size, and in the same breath mention Vodafone and Goldman Sachs in my negotiations.

Although I agree that the situation with Goldman Sachs was deplorable, how come anyone at all thought that Vodafone should pay UK tax on selling phones, in Germany, to Germans?

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25th Oct 2012 13:32

Repatriation of funds

frustratedwithhmrc wrote:

nogammonsinanundoubledgame wrote:
I wonder whether I can successfully quote back to them that they treat "customers" consistently regardless of size, and in the same breath mention Vodafone and Goldman Sachs in my negotiations.

Although I agree that the situation with Goldman Sachs was deplorable, how come anyone at all thought that Vodafone should pay UK tax on selling phones, in Germany, to Germans?

 

Because they are a UK company? There are lots of UK companies that sell stuff to Germans, in Germany. Should they be able to get away without paying any tax?

 

But really the key part was about repatriation of funds. Vodafone wanted to keep profits off-shore, and then lend that money to the UK and Germany entities (where the interest costs would be tax deductible), but without paying any tax on the interest income.

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25th Oct 2012 11:13

Consider two tax adviser conversations, making points to a client about a risky position:

1. The rules of ABC could apply here, I am warning you this is risky

2. HMRC may agree with your approach, they may not

3. However the chances to them looking at this is remote, and the technical knowledge of the staff doing so generally poor. 

4. Are you the business owner happy with this risk?

If on the other hand it ran:

3. HMRC will most likely look at a business of your size every 5 years, and the staff are generally quite good at spotting this sort of thing.

4. Are you happy taking this risk?

The decision will be very different and the overall tax take much much higher.

The trouble is HMRC would measure that the officers doing this regular visits pick up (probably not a lot) but what they don't add up is the fact the risk has moved considerably and the businesses would be keener to get things right at the time and not take too many risks and not actually leave anything for them to find. Thats much harder to measure. 

Its like when you are driving along the motorway and people are doing any speed they like and a patrol car pops up and everyone rolls past at a smidgen over 70mph. They will catch far fewer people than hiding in the bushes and pouncing out at the ones speeding, but if the aim is to slow the traffic its more effective. 

 

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25th Oct 2012 12:58

"CHANGING DATA METHODOLIGIES?"

such a "strategy statement" spells out

A) bad customer service to all within self assessment who may or may not run a small business

 

B)the institutional laziyness of HMRC IT systems causing small taxpayers to be hounded left right and centre by filing deadline reminders or unjustified penalty notices

 

C)that all small businesses who dont have the wherewithall to employ a company accountant, IT system or are not computer literate will be discriminated against.

hence the following scenario/advice applies to anyone trying to do their bit to pay the right anount of tax.

"The rules of ABC could apply here, I am warning you this is risky

2. HMRC may agree with your approach, they may not

3. However the chances to them looking at this is remote, and the technical knowledge of the staff doing so generally poor. 

4. Are you the business owner happy with this risk?"

 

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26th Oct 2012 11:44

Scary stories

Simon Sweetman has responded to this story in his latest blog post 'Scary stories'.

He starts:

What passes for news in the financial sector is not always what it seems. Financial journalists, even more than many others, are inclined to pick up someone’s press release and pop it undigested into the paper.

Read Sweetman's full blog...

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