Tax Enquiries Could Hit Growing Businesses in Notts

GROWING businesses across Nottingham could be hit by HMRC’s increasing focus on SMEs according to a local taxation expert.

Research conducted by accountancy firm UHY Hacker Young found that an additional £489m in corporation tax was raised by HMRC last year (2014/15) through investigations into SMEs – with them being viewed as ‘soft targets’ in the drive to reduce the corporation tax gap.

The ‘tax gap’ is the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected. The SME share of the £3bn gap shrank from £2.1bn in 2012/13 to £1.4bn in 2013/14, while that for large business service remained at £1bn during the same timeframe.

Simon Browning, tax partner at the firm’s Nottingham office, believes this is illustrative of HMRC’s increasing focus on SMEs.

He said: “This research appears to show us that HMRC is aggressively going after small businesses as ‘easy pickings’ in its bid to reclaim tax and it is certainly possible that they will look to further accelerate investigations moving forward to further close the gap.

“Nottingham has a really thriving community of small and start-up businesses, which will become the city’s lifeblood in years to come, so it is essential that business owners have their tax affairs in order so that they are not negatively impacted.

“The substantial closing of the tax gap for SMEs and non-movement by larger businesses is a clear demonstration of the increased pressure by HMRC on SMEs to fill the shortfall.

“Smaller businesses simply don’t have the resources available to those big name companies like Amazon and Starbucks which are seen to be ‘getting away with’ paying disproportionately small amounts of corporation tax – and dealing with HMRC enquiries can have a real impact on the day-to-day running of their businesses.

“Not only could this mean a huge resource required to answer questions, but large and unexpected tax bills face SMEs with a very real threat to plans for expansion and growth, so it is essential that business owners have their affairs in order.”