HMRC to target fast growing businesses for risk assessments and tax affairs

HM Revenue & Customs(HMRC) is writing to thousands of businesses in order to discuss their tax affairs, with a view to improving compliance and ultimately boosting tax receipts explains Mark Webb, chairman of the property and construction group at Smith & Williamson, the accountancy and investment group.

HM Revenue & Customs (HMRC) is writing to thousands of businesses in order to discuss their tax affairs, with a view to improving compliance and ultimately boosting tax receipts explains Mark Webb, chairman of the property and construction group at Smith & Williamson, the accountancy and investment group.
Initially, 100 of the fastest growing small and medium-size enterprises (SMEs) in the UK will be targeted, along with mid-sized businesses with a group structure.

HMRC has said that, in time, they plan to contact 138,000 businesses with turnover from £20m – £200m to discuss their tax affairs.  These plans are likely to affect a number of property and construction groups, particularly sub-contractors or those within the supply chain.

The campaign has been initiated as HMRC estimates that almost £15 billion, or 44% of the £34billion tax gap, is due to SMEs non-compliance. HMRC data suggests that much of this shortfall is caused by errors and failure to take reasonable care, as opposed to avoidance.

HMRC is targeting not only small, but also mid-sized businesses, many of which have group structures. These will often be long established family-owned businesses or property entities with separate SPVs often structured to cater for legal and commercial issues.

‘Businesses should expect HMRC to check their systems and particularly how they manage VAT and PAYE matters. Additionally, it is 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,’ explained Webb.

This new campaign follows on the success of the large business unit, which focuses on improving compliance among companies defined as large or ‘large & complex’, including many listed companies.

What many smaller businesses may be unaware of is the length of time and effort involved in compiling information for the revenue for seemingly small requests.  They need to take steps to ensure they have a full understanding of tax issues in their business and sector before HMRC ask.