By Ben Simmons
Richard Godmon, partner at Menzies LLP, details the latest developments from HM Revenue & Customs and how they are likely to impact small businesses.
HMRC plans to bring in additional £7 billion — expect a big drive on all cash businesses
The National Audit Office report on HMRC reveals that by 2014 it intends to be bringing in additional tax revenues of £7 billion a year. To achieve this it will allocate resources to tackle different areas of the tax gap, but will focus on tax evasion by individuals, including the hidden economy, and SMEs.
HMRC is trying to be more targeted and is using multiple data sources to identify tax evaders more effectively. It already uses its Connect system to analyse and identify potential links and targets, and has confirmed that it will use new technology to trawl the internet for information about specific people and businesses. This will include cross-referencing tax returns against other information so that it can build a picture of where there are taxpayers with missing returns.
Ultimately this is a numbers game — the wider you cast the net, the more you bring in. Hitting its £7 billion target can only mean many more investigations and records checks. With so much done online these days, which is very traceable, HMRC’s mention of individuals, the hidden economy and SMEs suggests that its focus for the next few years will be squarely on cash businesses.
OTS move to ease tax burden on small businesses comes as a relief
The Office of Tax Simplification (OTS) has set out recommendations on easing the tax burden for small businesses. Initial impressions are that they are well thought through. For example, the recommendation that the default option for the smallest businesses is to include receipts and payments for accounting and flat rates for expenses will be a blessed relief for many, and will help many entrepreneurs to concentrate on business, not administration.
The consistent message we hear as business advisers is that there is too much red tape and that the tax system can be inflexible to changing circumstances. We welcome the recommendation of a disincorporation relief for trading companies, even if it is likely only to apply to "micro" companies. Having the flexibility to change business structure on a tax-neutral basis whilst still trading will benefit the wider economy. Smaller businesses need to be light on their feet in these challenging times.
HMRC to launch 30 new taskforces in the 2012/13 tax year
HMRC has announced its latest plans to launch 30 new taskforces in the 2012/13 tax year. The likely targets will include the clothing distribution and retail, the motor trade, and indoor and outdoor markets.
Its approach is to bring together various compliance and enforcement teams and focus on specific sectors where it believes there is a high risk of tax evasion.
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