The government has tasked HMRC with raising an additional £7bn a year in tax revenue by tightening up procedures and introducing new initiatives. Unfortunately, with about half of the £35bn tax gap attributable to SMEs, the UK’s small businesses look likely to bear the brunt of the tax office’s attention.
So what measures are HMRC employing to meet their target?
The tax office has recruited an additional 2,500 compliance officers, tasked with enquiring into taxpayers’ affairs from VAT through to Corporation Tax. Officers are authorised to use all HMRC’s powers.
An estimated 20,000 Business Record Checks (BRCs) will be carried out this year, looking at all aspects of financial practice. Specifically targeting SMEs, BRCs are either carried out remotely and/or by undertaking a visit to make sure that companies are keeping sufficient records.
In total, 42 taskforces have been launched. These specialist teams visit traders to examine their records and carry out other investigations. Teams generally focus on high-risk sectors and specific geographical locations. For example, six taskforces set up in May 2012 looked at:
Historically, HMRC has operated a range of tax amnesties for specific groups. Amnesties usually have a time limit and so far have yielded £547m from voluntary disclosures. One of the most recent amnesties was the VAT Outstanding Returns campaign, which closed in February, targeting among others, small businesses and the self-employed.
The tax office has a huge database containing information used for risk assessments and identifying taxpayers for investigation. Information supplied by a range of organisations such as the Land Registry is also used.
HMRC is also implementing measures to cut costs, such as the closure of all of its enquiry centres. However, this has given rise to doubts about HMRC’s ability to deal effectively with queries and to communicate constructively with businesses and individuals. Criticised by the Association of Chartered Certified Accountants, the move could be seen as withdrawing support and advice when people need it most.
Not only are smaller businesses a tax target, but they also lack the financial expertise available to larger organisations. The increase in tax enquiries makes it more important than ever to seek advice on tax planning and procedures from a well-informed accountancy partner. Irrespective of whether you place your tax affairs in the hands of a qualified accountant or go it alone, it’s clear that SMEs need to get their tax affairs in apple pie order.
Blog supplied by Carl Elsby, Managing Director of Elsby & Co