HMRC rake in extra £3.4 billion from SMEs in 2016/17
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HM Revenue and Customs (HMRC) collected an extra £3.4 billion from small- and medium-sized businesses as a result of underpaid VAT in the last financial year.
According to PfP, investigations into the potential underpayment of VAT in the 2016/17 financial year led to an extra £3.4 billion collected from SMEs.
VAT revenue accounted for 49 per cent of the additional tax take from investigations into SMEs by HMRC, it reported - a figure that increased from 45 per cent the year before.
The firm said that this is a trend that will likely continue as the tax authorities attempt to tackle tax evasion, increasing scrutiny on those who make small mistakes.
"Over the years HMRC has widened its net - cracking down on smaller businesses, as well as larger organisations," said Kevin Igoe, managing director of PfP.
"It's clear from the high tax take that HMRC have found investigations into SMEs to be fruitful, and therefore it is likely that this focus on smaller organisations will continue.
"In order to avoid scrutiny from the revenue, SMEs must make sure they are filing their returns correctly, so as not to incur a hefty fine.
"VAT can rake in a lot of extra revenue for HMRC, and therefore the taxman is prepared to use all means at its disposal. This will include the use of its Connect database and taskforces to identify those it suspects may be underpaying on their tax as well as more aggressive tactics such as APNs and property raids."
PfP says that as of September 2016, HMRC's Connect software's powers have been extended further still as it is granted access to files held by banks and other financial institutions based in British overseas territories.
The software was developed to access and trawl databases of personal and commercial financial information, in order to identify offenders.
While there is no way to safeguard against investigation, you can take some steps to minimise your risk.
- Submit your tax returns on time
- Be accurate and complete
- Explain any changes before questions get asked
- Keep good records and declare everything
Given the costs that can be incurred by having your accountant draw up all the necessary documents if you are investigated, it is advisable to get tax investigation insurance.
Some accountants have been known to charge up to £150 for this standalone service. Check with your accountant whether you are covered, and if you are being charged extra for this service.
The good news is that with ActSmart you have tax investigation protection as standard with any paid for subscription, so if your business is investigated you will be covered against all the costs association with preparing the necessary documents requested by HMRC - which can be thousands of pounds.
To make sure your business is covered, join ActSmart today.
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