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HMRC to investigate fastest growing SMEs over tax compliance

HM Revenue and Customs (HMRC) plans to contact up to 138,000 small businesses with turnover from £20m - £200m in a bid to discuss their tax affairs.

The tax authority wishes to conduct risk assessments of SMEs in an effort to improve tax compliance, with the end goal of boosting HMRC’s tax receipts.

The campaign has been initiated due to HMRC estimates that suggest 44 per cent of the £34bn tax gap comes from small and medium-sized business non-compliance.

HMRC data suggests much of the tax shortfall is caused by tax errors and an inability to take reasonable care in filing returns to HMRC, rather than tax avoidance.

HMRC is initially writing to the 100 fastest growing SMEs, along with mid-sized firms with a group structure – often long-established family-owned businesses.

Tim Lyford, national head of corporate tax, Smith & Williamson, said: “The 100 fastest-growing businesses are being selected by HMRC as they may be among the most likely to be facing issues such as bullying and selling property, investing in new premises and machinery, or even acquiring other businesses – all of which can have complex tax implications.

“For these reasons, the tax authority is taking a close interest in this entrepreneurial and fast-moving sector.

“Businesses should expect HMRC to check their systems and particularly how they manage VAT and PAYE matters.

“Additionally, it’s likely to be looking at expenditure on capital equipment and repairs, plus claims for business expenses.

“These are routine accounting matters for businesses up and down the country but can be fraught with difficulty.”

This upcoming campaign follows the success of the large business unit, which focuses on improving compliance among companies defined as large or ‘large and complex’, which has included many companies publicly listed.

The tax authorities also worked with hundreds of small business owners back in 2012 when it reviewed Business Records Checks.

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