Printer Friendly

No such thing as a free lunch from the taxman - if you're an SME.

Byline: Alex Turner

THERE are a myriad of ways to define an SME, most commonly involving employee numbers, turnover or balance sheet total.

I'd like to suggest a simple demarcation.

It is a large business if its senior management are invited for lunch by HM Revenue and Customs (HMRC) and an SME if it feels like they are e 1ating your lunch.

Everyone has heard plenty of war stories about dealing with the taxman.

My favourite was told to me during that period a couple of years ago where - publicly at least - there was an effort to show patience towards firms who had fallen slightly behind on their tax bill.

After asking to be able to stagger VAT payments to catch up on a relatively small deficit, the person in question was given the response: "But why don't you have the money? VAT isn't for you to spend, you should put it aside as you get it." As opposed to having it put aside after lengthy lunch meetings.

'50% gapis The issues surrounding the treatment by HMRC of companies like Vodafone and Goldman Sachs, who were the recipients of so-called "sweetheart" deals, culminated in a report by Parliament's Public Accounts Committee just before Christmas that criticised such relationships as being too cosy. Large businesses' unresolved tax bills are estimated to total more than pounds 25bn. It is in this climate that HMRC is preparing to roll out its Business firms' Record Checks programme, which plans to inspect up to 20,000 SMEs from April, with fines of up to pounds 3,000 for those businesses unable to produce the required paperwork.

of tax Following a pilot, HMRC is now undertaking a "strategic review" of the scheme - presumably over a lunch or two - before it presses ahead.

HMRC has said it attributes 50% of the tax gap to SMEs and that it believes, of that, one-third arises from errors and businesses failing to take reasonable care. That's the rationale for the spot checks, but it is hard to see how these interventions into individual businesses will help to close the tax gap in any meaningful way.

The deliberately careless will remain so, but the vast majority of businesses either do, or believe they do, take reasonable care. For them, the threat of spot checks will have little impact.

But there is a solution. Well, I always sleep better after a good lunch.

* TRADING Gossip: Page 16 * ALEX TURNER is the general manager of financial training firm, Ambitious Minds
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2012 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Business
Publication:Daily Post (Liverpool, England)
Date:Jan 4, 2012
Previous Article:City skincare firm in push to enter overseas markets.
Next Article:City tennis event to benefit from 'Olympic fever'.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters