In October 2014 HMRC announced that there had been an increase in the ‘tax gap’ – the difference in the money that HMRC collects from taxpayers and the estimated value that is owed.
This rise in the gap has been blamed on mistakes in tax return forms and criminal tax offences however HMRC believe that 50% of the ‘tax gap’ is associated with the small and medium sized business sector.
Due to the increase in the money owed HMRC have created a new system when assessing a companies tax scheme, instead of beginning a general enquiry officers will now carry out a review of business records.
If the review suggests poor record keeping or some other sign of accounting problem they will begin an in-depth investigation into what the business owes in tax.
Recent actions by the government tax officials have included recruiting 2,500 new compliance officers who have been split into 40 specialist taskforces to carry our extensive investigation (raising over £60 million).
The number of inspections has also reached record levels and has increased by 60% over the last 12 months while the number of self-employed being inspected has quadrupled over the past two years.
Their recent actions suggest that they are targeting those with poor business and accounting records, however there is some concern that those making innocent mistakes are being targeted.
HMRC have stated that the majority of additional tax owed will come from small and medium sized businesses, suggesting that they are at the centre of the investigations.
The main concern from taxpayers is the time it takes to undergo these extra checks and provide the appropriate documentation.
Using specialist SME accountants such as MCC Accountants can save time and money, we are able to give tax advice for SMEs which helps you organise your business records in case of inspection. For more information on the services that we offer call us on 0161 707 1500.