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As part of a Freedom of Information (FOI) request from accountancy network UHY Hacker and Young, HMRC have come under fire for the way they have been targeting smaller businesses.

HMRC are attempting to plug the UK tax gap, a reported £18.3bn in uncollected taxes from small businesses. Back in 2015, HMRC announced that they had a tax shortfall of £36bn. Smaller firms are said to make up around half of this figure. In 2016, an extra £468m was generated in tax revenue by small businesses compared to the previous year.

However, tax experts have criticised HMRC for turning a blind eye to much larger companies like Google or Apple who are well known for paying minimal amounts of tax in light of the massive profits they generate.

The parliamentary public account committee have taken this opportunity to point out that HMRC fails to acknowledge tax fraud at the top. They said: “HMRC’s assessment of the tax gap shows that the level of tax fraud has remained virtually static over the last five years.”

Margaret Hodge, committee chair said “HMRC still focuses too much on small businesses – the easy wins – and lets the big multinationals off the hook.”


Tax Pressure More Difficult for SMEs

Roy Maugham, tax partner at UHY Hacker Young highlighted that HMRC’s crackdown on smaller firms would only add to the pressure they are already under. “There is increasing pressure on small and mid-sized businesses to spend their time and money on systems to ensure that tax affairs are accurate and up to date,” he said.

“Without adequate care, small businesses are at risk of being pulled up over minor mistakes or small disparities, which could incur disproportionately heavy fines and penalties.” These heavy fines make a larger mark on smaller firms than they would to massive corporations. Rising costs of doing business plus fines can do more harm to a small business and possibly even risk their success in the future.

Advice website Informi has found from recent research that one in four small businesses had previously missed the January 31st tax deadline. As a result, they have been fined by HMRC on an average of £300. Overall, this made up £87m in fines by February 1st in 2016.

With changes to the tax system due to be rolled out to businesses nationwide in the Make Tax Digital scheme, this could only add to the confusion and pressure that small businesses are already under. Many small businesses have not even heard of this scheme and there is criticism that there will simply not be enough time for small businesses to update their systems to take on this new way of doing things.


What do you think, is HMRC unfair to go after small businesses while letting bigger corporations off the hook? Or do you think smaller businesses should keep a better watch on their tax affairs? Let us know your thoughts in the comments.


About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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