Small firms pay extra £3.9bn in VAT

New research has found that HM Revenue & Customs (HMRC) took a record £3.9 billion in extra VAT from tax compliance investigations into small businesses in the 2013-14 financial year.

The figure, which was ten per cent up on the £3.6 billion total for 2012-13, has shot up from £2.2 billion in the 2010-11 tax year.

The research was published by accountancy group UHY Hacker Young on 8 December. The firm’s Simon Newark said:  “HMRC has taken an increasingly hard line over the last year in its attempts to increase tax receipts, so more and more small businesses in particular are finding themselves facing investigation over VAT arrangements that have long been accepted by the tax authority.

“The belief voiced by many businesses facing these challenges is that HMRC has gone through all the obvious, high value tax avoidance targets and often met with resistance or the likelihood of expensive court cases being drawn out for years. They are worried that HMRC is hoping to achieve some easy results by targeting smaller businesses using novel arguments against VAT treatments that have been accepted for years.

“The cost of challenging demands for extra VAT through the courts can be prohibitive for a lot of small businesses, and many will simply decide it’s simpler and more cost-effective to just write a cheque to HMRC, even if they believe the demands are incorrect.”

Resolving a dispute with HMRC can still be time-consuming and cause significant disruption to a business, so it may be tempting to settle, even if you believe you have a strong case.

But seeking expert advice can prove to be a more cost-effective option, by providing robust representation of your case resulting in a positive outcome or by minimising any settlement of tax and penalties

If HMRC shows an interest in your VAT or other tax affairs, Taxation-Investigation’s specialists can provide expert advice and we have a proven track record in dealing with matters quickly and cost effectively.

For more information on Taxation-Investigation services, please contact us.