Are HMRC pursuing small business instead of the large corporates?
I have regularly commented in my Blogs about the “Bully-boy” tactics of the Revenue, especially with regard to individuals and small to medium-sized businesses (SME’s). Well now there is evidence that my previously expressed concerns as to where this attitude would lead was not just me being a touch paranoid.
Accountancy firm UHY Hacker Young, have obtained data that HMRC’s tax receipts from investigations into individuals and SME’s have increased by a third in the last 12 months. However, during the same period not a single additional penny was raised from investigations into Companies in the Footsie 100 and indeed it is not even clear whether any enquiries were conducted into firms in this sector.
In his 2010 Spending Review, Chancellor George Osborne set HMRC a target to raise significant additional tax revenues from compliance activity and HMRC are trying hard to do this. Unfortunately, they have gone for the easy option and have primarily targeted individuals and SME’s, with extra tax from compliance investigations into this sector rising from £432m in 2011/12 to £578 in 2012/13.
While the Revenue continue to negotiate so-called “Sweetheart Deals” with the big corporations, small businesses are bearing the brunt of HMRC’s tougher approach to tax investigations. HMRC are partly relying on the fact that SME’s are often less likely to have accountants to manage their finances, making them more prone to mistakes and therefore an easy target. This also means that they are in a significantly weaker position to negotiate over allegations of underpaid tax than a large corporation.
HMRC are Targeting Small Business & Sole Traders
Over the last three years various taskforces from HMRC, have targeted tax evasion in sectors of the economy ranging from airline pilots and plumbers to restaurant owners and private landlords. HMRC have stated that the targeting of different industries is a smart use of resources, but many tax experts question whether modest returns from some campaigns are worth the effort.
There is no doubt that the Chancellor has set ambitious targets to bring in billions of pounds through additional compliance, but this does not excuse HMRC’s apparent desperation to squeeze as much money as they can from businesses who may owe tax by somewhat dubious tactics in some cases.
George Osbourne wants to increase tax reciepts
I am certain that many individuals and small firms are not paying the correct amount of tax, but surely it’s wrong to always go for the soft option of going for the sector least able to defend itself. Surely a targeted blitz on the corporate sector’s love of dodgy tax avoidance schemes will raise more money and use fewer resources, with the bonus that the general public will wholeheartedly approve.
So I call upon the boss of HMRC, Lin Homer, to change tack and go for the big firms and stop acting like a bully to the small business sector.
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David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.