HM Revenue and Customs has collected an additional £737.3m from investigations into companies over tax avoidance – and SMEs in particular have come under fire.
UHY Hacker Young, the national accountancy group, says that SMEs account for over half (£373.4m) of the additional sums collected in tax year 2014/15– despite being responsible for only 11% (£96bn) of total UK payroll.
UHY Hacker Young adds that making up 89% of payroll (£726bn), larger businesses paid the comparatively low figure of £363.9m in additional payroll taxes and penalties.
UHY Hacker Young says that SMEs are bearing the brunt of HMRC’s increased tax investigations work because SMEs are more likely to take on casual labour, run flexible workforces or operate as umbrella companies – often making it difficult to determine to which payroll tax bracket their labour force might belong.
UHY Hacker Young says that another reason for errors is that SMEs are also less likely to seek expensive advice on tax issues, meaning they stand at higher risk of making mistakes when it comes to filing complicated employer compliance tax returns.
UHY Hacker Young tax partner Roy Maugham says: “SMEs are being chased for a totally disproportionate amount of underpaid payroll tax, compared to their larger counterparts. But much of the underpaid tax is due to genuine errors. This strongly suggests the Government needs to simplify its systems to help SMEs avoid mistakes.
“While SMEs will be reluctant or unable to pay for expert advice, they are clearly struggling to navigate the tax system as it stands.”