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 recent statistics.
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, 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. It’s a common belief that the long-term trend of high tax take from SMEs is likely to continue. The minority of businesses looking to avoid tax are putting those who make minor errors on their tax returns under scrutiny. An HMRC inquiry can be particularly costly, time-consuming and disruptive for a business which does not have contingency plans in place to deal with a long tax investigation. In order to avoid inquiries and fines from HMRC, good housekeeping is essential; SMEs need to ensure they are fully compliant and submitting accurate and timely paperwork.
The figures speak for themselves, it’s evident from the high tax take that investigations into SMEs are bearing fruit for HMRC, so it’s unlikely that they will reduce their focus on smaller organisations.