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Small businesses targeted by HMRC in £470m tax haul

HM Revenue and Customs (HMRC) recouped an extra £470 million in tax owed by UK small businesses last year as part of increasing probes into the tax affairs of the small business community.

The figure was published as part of data obtained by UHY Hacker Young, who warned SMEs that they could come under further scrutiny with HMRC shifting its focus from tax investigations into larger companies to smaller firms.

In the year end 31st March 2014-15, HMRC’s tax revenues from large businesses after tax inquiries declined by 13 per cent from £4bn the previous year to £3.5bn.

Top 20 firm, UHY Hacker Young fears that “SMEs can be a soft target for HMRC” simply because budgetary constraints mean smaller businesses cannot usually afford to employ in-house tax specialists, making it harder for them to challenge tax bills handed to them by HMRC that they may view as unfair or wholly inaccurate.

Roy Maugham, tax partner, UHY Hacker Young, said: “Small businesses have already felt the effects of the taxman’s tougher approach to compliance, and the target to bring in billions more may lead to HMRC squeezing every pound it can from SMEs.

“As well as being more likely for SMEs to make a mistake when it comes to their taxes, they are also less likely to effectively negotiate if they disagree with HMRC’s demands as they will feel out of their depth and fear arguing with the taxman will lead to substantial costs and protracted disruption.”

HMRC is also putting in place a wider range of specialist taskforces, designed to improve the operational efficiency of its regional offices – many of which (170) are facing closure.

“HMRC is on a drive to increase tax-take. Its methods have changed in order to achieve this – it now focuses on specific subsectors, and even on specific issues like corporate entertainment,” added Maugham.

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