Compliance investigations into SMEs raked in £565m for HMRC in 2012-13, up from £434m in 2011-12 (year ending March 31).
In the 2010 Spending Review, the Chancellor of the Exchequer 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,” says Roy Maugham, tax partner at UHY Hacker Young in London. “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.
“With far smaller budgets than larger businesses, SMEs 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.
“That also means they are in a weaker position to negotiate over allegation of underpaid tax than a big corporate.”
Since 2010, HMRC has further ramped up compliance activity with the launch of 40 specialist taskforces aimed at extensive investigation into businesses and individuals.
HMRC is exercising all avenues to bring in as much revenue as possible – including those which may have previously been overlooked – to ensure it reaches its target.
HMRC’s taskforces have raised over £60m in additional revenue already, with one taskforce focused on the fast food industry raking in £25million. In July 2013, a specialist taskforce tackling small businesses in the holiday industry in South Wales was launched, which is expected to bring in £2.5million.
Roy explains: “In regards to the most recent taskforce launched, our own South Wales office has seen the effects of HMRC’s activity in the area, with many enquiries coming through from businesses within the holiday industry seeking advice.
“While the tax affairs of large corporations such as Starbucks and Amazon have been publicised heavily, HMRC’s crackdown on SMEs has not attracted as much attention.
“It is important for 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 – as the ever-growing yield from these investigations proves.”
The taskforces launched by HMRC have been successful in bringing in additional revenue for HMRC through short, sharp bursts of compliance activity into businesses believed to be evading tax.
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