HMRC targets fast growing businesses for risk assessment

HMRC is writing to thousands of businesses to discuss their tax affairs with a view to improving compliance and ultimately boosting tax receipts. They are initially targeting the 100 fastest growing SMEs along with mid-sized businesses with a group structure.

HMRC states that, in time, they plan to contact 138,000 businesses with turnover from £20m – £200m to discuss their tax affairs.

The campaign has been initiated as HMRC estimates that almost £15billion, or 44 per cent of the £34billion tax gap, is due to small and mid-sized business non-compliance. HMRC data suggest much of this shortfall is caused by errors and failure to take reasonable care, as opposed to avoidance, and this is the basis on which the campaign is taking place.

“The 100 fastest-growing businesses are being selected by HMRC as they may be among the most likely to be facing issues such as buying 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,” said Tim Lyford, national head of corporate tax at Smith & Williamson the accountancy and investment management group.

HMRC is also targeting not only small, but also mid-sized businesses, many of which have group structures. These will often be long established family-owned businesses.

“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,” explained Lyford.

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 publically listed companies. The tax authorities also instigated Business Records Checks for hundreds of small businesses in 2012.

Image: tax return by Shutterstock