Nic Paton
Small businesses are facing a summer of crackdowns over tax, VAT and record-keeping which have been branded as unfair by small business organisations.
HMRC has said it plans to create nine specialist “task forces” this year to crack down on tax evasion, with the first – targeting the restaurant and hospitality trade – launched last month [May] and others to follow.
At the same time, it has said it will be targeting individuals and businesses trading above the £73,000 turnover threshold for registering for VAT but which have failed to do so.
A tax evasion “amnesty” where self-employed tradesmen, including plumbers, gas fitters and heating engineers, could come forward and admit to untaxed cash-in-hand work and only be fined 10-20% of what they owed as a result, came to an end last week [May 31].
Those subsequently caught and prosecuted will now face much stiffer fines or even the prospect of a criminal prosecution.
Finally, businesses employing 250 people or fewer or with a turnover of less than £40m will be targeted by HMRC during the second half of this year as part of a rolling programme of business record-checking, with firms found to be failing to maintain proper records risking penalties or having to pay extra tax.
The moves by HMRC are all part of a drive to raise an additional £7bn a year for the Treasury by 2014/15 and help reduce an estimated £42bn “tax gap” or shortfall in uncollected taxes.
’Only those who choose to break the rules, or deliberately evade the tax they should be paying, will be targeted. Honest businesses have absolutely nothing to worry about. But the message is clear – if you deliberately seek to evade tax HMRC can and will track you down, and you’ll face not only a heavy fine, but possibly a criminal prosecution as well,” says Mike Eland, HMRC director general enforcement and compliance.
But small business organisations have reacted angrily, with the Forum of Private Businesses criticising the Revenue for going after the “easy target” of small businesses instead of focusing on tax evasion by large corporates.
”There is a perception that SMEs are an easy target for HMRC when in fact it is large businesses that tend to be the main culprits,” says senior policy adviser Phil McCabe.
”There is also a view among many of our members that this approach is hypocritical, given the feedback we get on the shoddy levels of service many experience with HMRC,” he adds.
Richard Bradford, owner of Porters English Restaurant in Covent Garden and chairman of the Restaurant Association, has described the task force targeting his sector as “over-policing”.
”If restaurateurs are obeying the rules they do not have anything to worry about. But it is a shame restaurants appear to be being singled out this way. I have run a restaurant for 32 years and have always run it straight but I have still been inspected I don’t know how many times,” says Bradford, 63.
”You do get a sense HMRC targets restaurants because the sector once had a bit of a cash-in-hand reputation, but it doesn’t now. I do think we are being over-policed, whether it’s over issues such as paying the national minimum wage or taxes. Frankly, I’m surprised HMRC does not have more important things to deal with,” he adds.
Alan Pearce VAT partner at London Chartered Accountants, Blick Rothenberg, has also queried whether HMRC will actually have the capability to carry out such a heightened inspection programme, especially as it is set to be losing some 13,000 posts by 2014-15.
”I am rather sceptical about this. HMRC is not giving a good service at the moment and is under pressure – there is a backlog just on its normal compliance activities – so where is it going to get enough people to do this extra chasing? And I do not the tax gap is created by people on turnovers of£73,000 evading VAT. I think there are much bigger fish to fry elsewhere,” he says.
Unannounced visits tend to be rare, with the HMRC usually giving at least a week’s notice, advises Heather Taylor, tax investigations specialist at financial adviser Grant Thornton.
There may often be scope to negotiate a more convenient time for a visit to allow time for liaison with your accountant, she adds.
Businesses who find themselves receiving an unwanted knock on the door need to ensure paperwork is in order and easily accessible and that someone has been nominated (perhaps their accountant or a senior director) to take charge of the process from their end, argues Peter Mount of Woodfines Solicitors based in Bedford.
”If you are subject to a dawn raid, which is actually quite unusual, what you want to be doing is re-establishing some control over the proceedings.
”You are quite within your rights to check the identity of the officers attending and you may be able to delay them gaining full access until your solicitor has been contacted. But most of all co-operate. It can even make sense to offer them use of a room and copying facilities as that way you are being helpful while also containing their activities,” he adds.
No Comments on this post