It was October 2017 when I commented that “HMRC have their sights on small business” as HMRC were on record saying that SME’s dodge the most tax, releasing figures showing that small to medium sized businesses are responsible for 51% of the £5.2bn “tax gap” between what is owed and what is paid.
HMRC put tax-avoiding small businesses in to four categories, the “unthinking evader”, the “invested evader”, the “lifestyle evader” and the “systematic evader”.
It was very clear with increasing political pressure and further investment by HMRC in finding tax-evaders that HMRC were going to increase the number of investigations in an attempt to recover this unpaid tax.
I think it is fair to say that in the UK we have seen HMRC stepping up their game with regard to investigations and we are seeing increasing numbers of investigations in to the affairs of individuals and small businesses. Sometimes these investigations are without merit but HMRC have the power to conduct one.
I was amazed to read that HMRC has increased the number of asset seizures in 2016/17 by a massive 23%, seizing business assets from 1,953 UK firms. This stat suggests that HMRC are really stepping up their pursuit of small businesses who are not paying the correct amount of tax. What the research also showed was that the assets seized by HMRC were often sold on at fire sale prices with £41.6m raised at ‘asset auctions’ in the past 12 months.
The moral of these findings are, get some proper advice and structure your affairs correctly so that you pay the right amount of tax and limit the amount of tax you pay within the law. There are ways to minimise tax legally without breaking the law. Secondly, if you do find yourself under investigation by HMRC take some advice from an Accountant that specialises in defending small businesses and individuals when HMRC are taking action.
If you're a small business and you're looking for some advice, or you're currently under investigation please get in touch with one of our advisers, we're here to help you.
