Taxman under fire over small firm crackdown

Updated on 03 January 2012 | 15 Comments

HMRC has been criticised for a project to check up on the tax returns of up to 20,000 small businesses.

There has been anger at a new project launched by HM Revenue and Customs (HMRC) to conduct spot checks on small businesses.

From April, HMRC plans to check the tax returns of up to 20,000 firms and inspect their tax paperwork.

Any firm unable to back up their tax return faces a fine of up to £3,000.

The Business Records Checks (BRC) project has already been piloted in eight areas. It was launched as part of the Government’s £900 million scheme to crack down on tax avoidance and evasion.

HMRC reportedly estimates that underpayment of tax by small- and medium-sized companies accounted for up to 50% of the UK’s ‘lost’ tax revenue.

But the crackdown has faced criticism from both Conservative and Labour MPs, particularly in light of claims that HMRC is owed up to £25.5 billion by large companies.

Following the widespread criticism, HMRC says it will hold a “strategic review” of the BRC project. It admitted that “the project would have benefited from more detailed consultation with tax professionals at an earlier stage.”

Goldman Sachs claim goes to court

Campaign group UK Uncut Legal Action served legal papers in the High Court against HMRC just before Christmas. The group wants a declaration that an agreement to allow a bill for unpaid tax on bonuses at Goldman Sachs to be waived was unlawful.

HMRC is also set to pursue individuals and companies it suspects of not registering to pay VAT.

It says that only 841 of a suspected 40,000 targets had come forward by 22 December as part of an amnesty that ended on 31 December.

However, in another blow to the beleaguered organisation, it emerged last week that almost two-thirds of VAT fines issued to small businesses by HMRC were found to be incorrect on appeal.

More: How to cut your tax bill | HMRC declares war on tax-dodging landlords


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