Keep HMRC informed, warns business group

An organisation representing small businesses has warned entrepreneurs to fully update HM Revenue & Customs (HMRC) about any changes to their operations, following a report that one firm is facing a £10,000 fine for not telling HMRC it had changed its name.

The Forum of Private Business revealed on 9 August that the firm, which did not want to be identified but which has always made VAT payments and submitted tax returns on time, was originally hit with a fine of more than £30,000 under VAT notification liabilities contained in the Finance Act 1985 and the VAT Act 1994.

The fine was imposed after the business changed from a partnership to a limited company – adding a ‘ltd’ to its name – without informing HMRC, even though it retained its old VAT number and HMRC received all the tax due.

The fine has been reduced to just over £10,000 after intervention by accountants and the forum’s tax adviser Andrew Needham, with work continuing to further reduce the penalty.

Mr Needham said: “I am concerned that this is a change in HMRC’s long-standing policy of waiving its technical ability to impose this penalty fine in such circumstances.

“If this is carried through and sets a precedent it could result in huge fines being imposed on small businesses which, in reality, have done very little wrong.

“It is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated – but this heavy-handed approach is the very opposite of the support that is desperately needed at this difficult time.”

Mr Needham highlighted a House of Commons debate in July 1986 on the legal clause to protect small traders making innocent mistakes from recently introduced fixed VAT penalties, a clause which was subsequently included in the legislation.

The forum is urging all small business owners to contact its Public Affairs team about their experiences of HMRC – including if they have received fines they feel are unfair or disproportionate. They can contact the forum at 01565 626016 or email

Link: HMRC VAT advice