Half the UK’s small businesses believe HMRC tax investigations are too intensive, and a similar proportion do not believe the tax authority imposes penalties fairly, according to a survey from insurer PfP.
PfP highlights HMRC’s own commissioned research that showed 52% of SMEs think HMRC’s tax investigations are too tough, while 56% do not think HMRC attempts to minimise the cost, time and effort involved in dealing with inquiries.
In addition, 48% of businesses do not think HMRC imposes penalties fairly among taxpayers, with a feeling that small businesses are a much easier target.
Kevin Igoe, managing director at PfP, said: “Small businesses think they are getting rough treatment from HMRC and are making this clear.
“Small businesses are often at the receiving end of lengthy tax investigations, which can be very disruptive. Many of these businesses also do not have the resources at their disposal to manage an inquiry or negotiate with inspectors.
“Although some small businesses responded positively when asked about their impressions of HMRC’s investigations, we need to get to a point where an overwhelming majority are happy with what’s happening.”
Specialist insurance firm PfP says the focus on small businesses is likely to continue given the high levels of extra tax collected by HMRC through its investigations into this taxpayer group.
For example, the investigation units at HMRC that focus on small businesses and individuals collected an additional £16 in taxes for every £1 spent on their investigatory staff in 2016/17, up on the £15 collected the year before.
HMRC’s tax gap analysis, published in June, showed that 41% of the total shortfall was down to small businesses. SMEs are responsible for an overall gap of £13.7bn.