HM Revenue and Customs (HMRC) has come under fire over new plans to conduct spot checks on thousands of small businesses – a particular slight to small firms after HMRC so recently let big companies like sweetheart tax deals.
HMRC’s tax inspectors plan to check up to 20,000 small businesses to see if they have adequate proof of expenses and income dating back years. Those who are unable to do so will face penalties, which business leaders warn could push some into bankruptcy, and on a larger scale thus inhibit the economic recovery.
John Walker, national chairman of the Federation of Small Businesses said: “Despite the worsening economy, HMRC is launching this scheme regardless of the consequences.
“We have spoken to HMRC and expressed our concerns about this a number of times. But as far as they and ministers are concerned it is a policy aim to make this happen.
“There is a huge difference between the rhetoric of the Government about helping small businesses and what it is doing in reality.”
Last month, MPs called for HMRC to be more open about its dealings with large companies, claiming there are £25bn of outstanding tax issues with these firms. Permanent secretary for tax Dave Hartnett was singled out in claims he failed to handle tax negotiations with some major firms properly.
An HMRC spokesman said: “Following consultation with representative bodies, HMRC has started a detailed review of the Business Records Checks (BRC) project.
“HMRC recognises that the launch of the Business Records Checks pilots has caused considerable concern to the tax profession, and that the project would have benefited from more detailed consultation with tax professionals at an earlier stage. In the light of these concerns, HMRC will undertake a strategic review of the project, in consultation with the professional and representative bodies.”
The spokesman added: “The findings of the review will be shared with representative bodies in January 2012, and final decisions will be made by HMRC before the end of the current financial year.”
Meanwhile, Tory MP Priti Patel said it was “disgraceful” HMRC was harassing small firms while “blatantly doing deals” with major companies which allowed them to avoid paying millions in tax.
“It seems as though HMRC sees small businesses as low-lying fruit to meet their targets. That kind of persecution is outrageous.”