HMRC to take on SMEs

A continued Government commitment to bringing down the UK’s deficit whilst minimising the effect on public spend has affected every department. With Whitehall identifying and implementing new efficiencies, small wonder that HMRC is also coming under significant pressure to increase revenue.

‘Improving tax compliance’ of 138,000 SMEs

As part of this program, the HMRC has announced their intention to contact 138,000 small and medium-sized businesses with a view to “conducting risk assessments”, designed to help these targeted businesses “improve tax compliance”. Obviously this move is also hoped to improve tax receipts – HMRC estimates suggest that 44% of the current £34 billion tax gap comes from smaller, non-compliant businesses.

This news will do nothing to help lessen accusations that HMRC has been unfairly targeting Britain’s smallest businesses. For many years entrepreneurs and managing directors have felt that they already bear the brunt of HMRC’s tax recovery efforts, and that these latest measures do nothing to shift focus back to larger businesses. Indeed, HMRC’s own statistics cited above show that larger companies account for more than half of the lost revenue they are aiming to recover.

Who will be affected?

An initial small-scale group comprising the 100 fastest growing SMEs will be contacted, along with medium-sized companies built around a group structure – quite often exemplified by family businesses. And although 138,000 companies sounds like a large target group, it is worth noting that at this point HMRC is only looking into businesses with an annual turnover of between £20 million and £200 million.

If you are concerned that your business could be targeted for an audit, consider Tax Investigation insurance to cover you for any potential lost time during such a process – and ensure you have a professional accountant to help you deal with any HMRC queries.