HMRC accused of ‘unfairly targeting’ SMEs

During a recent exchange at a Public Accounts Committee hearing, MP and chairperson Patricia Hodge levelled an accusation that will resonate with many SME owners – that HMRC unfairly targets small businesses, and fails to sufficiently investigate large organisations involved in tax avoidance and evasion schemes. Questioning HMRC’s tax assurance commissioner Edward Troup, Hodge claimed, ‘what we’re interested in is the equality of treatment, SMES aren’t treated equally.’

Troup protested that this was merely a ‘perception’ and that all UK organisations are treated equally when it comes to tax investigations. He and other HMRC officials questioned were quick to point out that many of the loopholes used by large businesses to avoid paying tax, like secret Swiss bank accounts, are being closed. They therefore expect to increase revenue from these organisations at some point in the future, as well as simplifying the investigation process when checking enterprise-class liabilities.

But for SMES, they will see few changes right now. SMEs currently account for £15.1 billion in annual tax revenue and will still be high on the tax man’s priorities, particularly as investigating revenue from small businesses is typically easier and cheaper. In the last year, extra VAT take from SMEs rose by 10%, and Capital Gains Tax take by 24%.

Now there is a glimmer of hope that HMRC will begin shifting more of the focus of investigations from SMESs and onto large corporations. If you’re an SME owner concerned about the potential impact of an audit, you could consider Tax Investigation insurance for your business – and ensure you have a good accountant to keep your books in order and answer any HMRC queries.