Nowadays the idea of HMRC clawing back owed taxes conjures up images of Starbucks’ bosses having their Scrooge McDuck-style vaults emptied out by dowdy civil servants. Unfortunately, the latest news on tax recuperation seems to not involve big businesses at all, with HMRC instead going after freelancers and small businesses.
HMRC has managed to increase its income from compliance investigations by a staggering 39%. Small and medium businesses (you know, the ones creating jobs and actually paying tax) have been lent on hard, and the fines and tax recovered from them has risen from £311m to £434m in the space of a year. Impressive in a way, but why has such fervent investigation been placed at the door of the smaller business when Vodafone had their tax bill cut by billions?
The answer is simple – it’s like shooting fish in a barrel for HMRC. Whereas the large multinationals of the world are likely to employ teams of accountants to minimise their tax bill (and vigorously challenge any penalties from HMRC), small businesses are more likely to grudgingly accept the fines – and very unlikely to attempt to overturn a claim.
HMRC have specifically run initiatives designed to catch out the smaller companies, including “tax amnesties” for specific sectors and professions. They have invested more time in trying to find out if a company car has been claimed for properly and other minor compliance mishaps. Focus has begun to shift from the areas usually highly investigated such as VAT and PAYE to things such as private healthcare and subsidised fuel costs.
All of this could have even worse repercussions for freelancers, with a lot less time and money to deal with these issues (and trading conditions that could not be described as favourable). These incursions from HMRC on something as small as their use of petrol could end up being the tipping point for a fledgling company.
Photo by William Warby