Is your VAT return coming under scrutiny?
HM Revenue & Customs (HMRC) collected an extra £3.4 billion from small and medium-sized businesses through inquiries into the under-payment of VAT in 2016/17, according to a firm which specialises in tax investigation insurance.
Crack down on tax evasion continues
VAT revenue from SMEs accounted for almost half (49%) of the additional tax take from investigations into small and medium-sized businesses by HMRC’s compliance teams. PfP, a company which provides tax support and insurance to accountancy firms, said this is a higher proportion of the total VAT take compared with last year, when the figure stood at 45%.
As part of its ongoing crackdown on tax evasion, HMRC is increasing pressure on SMEs to maximise tax revenue. According to PfP, the long-term trend of high tax take from SMEs is likely to continue. The small number of businesses looking to avoid tax are also putting those who make small mistakes on their tax returns under scrutiny.
A tax inspection can be costly and timely
HMRC’s inquiries can be particularly costly, time-consuming and disruptive for SMEs which do not have contingency plans in place to deal with a long tax investigation. In order to avoid inquiries and fines from HMRC, SMEs need to ensure they are fully compliant and submitting accurate and timely paperwork.
Kevin Igoe, PfP’s managing director, said “It’s clear from the high tax take that HMRC has found investigations into SMEs to be fruitful, and therefore it is likely that this focus on smaller organisations will continue.”
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