A crackdown on by the UK’s led to a 5 per cent increase in the amount of cash collected by in the most recent tax year, new research reveals.
The research conducted by accountancy group UHY Hacker Young shows that HMRC collected an extra £474m in corporate tax as a result of investigations into SMEs during the 2016/2017 tax year, representing a 5 per cent increase on the previous year.
UHY said that authorities are turning the “spotlight onto small businesses” because they are considered “an easier target than many larger businesses”.
HMRC is under pressure to close the so-called “tax gap”, or the difference between the amount of tax that should, in theory, be collected by HMRC each year, and the amount that is actually brought in.
The most recent official estimate – from October 2016 – places the corporation tax gap at £3.7bn for the tax year 2014/2015.
Roy Maugham, a tax partner at UHY, described the practice of singling out SMEs for investigations as “unfair”.
“The costs of tax inquiries for SMEs can be high, and the investigations disruptive. Small companies may not have the necessary resources to bounce back, and the investigation could have serious consequences, even if they have made an honest error,” he said.
“Small and medium sized businesses have not been top of HMRC’s agenda in the past, but that is now beginning to change as HMRC are under pressure to recover increasing amounts of tax,” he added.
He said that small businesses “must ensure they do everything in their power to avoid making small mistakes on their tax returns”.
“These are the things that HMRC scrutinises – and they are not afraid to pull companies up,” he said.