According to PfP, leading provider of tax support and insurance, HMRC have already recovered billions in the underpayment of tax from businesses across the UK. HMRC is increasing their pressure on small and medium businesses in particular to maximise their tax revenue.
VAT has been a particular focus for them with almost half (49%) of the tax taken in during investigations coming from VAT revenue. This is an increase from last year where the proportion of the VAT take made up 45%.
Focus on smaller businesses
As any kind of tax investigation is going to be costly and time consuming for any small business, the best practice is to always ensure tax compliance.
This is important to note as HMRC continues its focus on small firms that try to avoid tax. They have found that the return on this focus is great and are therefore likely to keep on top of this crackdown.
HMRC have even created two new teams, the Individuals & Small Business Compliance unit and the Wealthy & Mid-sized Business Compliance unit to investigate tax owed through VAT.
Those SMEs that end up simply making mistakes are then much more likely to get picked up on it while HMRC keeps focus on these types of business.
Managing director of PfP, Kevin Igoe, says: “Over the years HMRC has widened its net – cracking down on smaller businesses, as well as larger organisations.
“It’s clear from the high tax take that HMRC have found investigations into SMEs to be fruitful, and therefore it is likely that this focus on smaller organisations will continue. In order to avoid scrutiny from the revenue, SMEs must make sure they are filing their returns correctly, so as not to incur a hefty fine.
“VAT can rake in a lot of extra revenue for HMRC, and therefore the taxman is prepared to use all means at its disposal. This will include the use of its Connect database and taskforces to identify those it suspects may be underpaying on their tax as well as more aggressive tactics such as APNs and property raids.”
The best way to avoid a HMRC investigation is to make sure you’re doing everything above board. Hiring an accountant or an accountancy firm will ensure that you’re fully compliant and won’t receive a call from HMRC.
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About The Author
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.