FSB concerned at HMRC revenue raising exercise

The Federation of Small Businesses (FSB) is concerned an HM Revenue and Customs (HMRC) consultation which closes on Monday, that could lead to implementation of spot checks on company records, will be used purely as a revenue raising exercise.

The consultation, ‘Business Records Checks’, states that 50,000 small businesses will be targeted by HMRC agents in order to check that their business records meet minimum reporting standards. If not, a fine of up to £3,000 will be levied, with the potential to raise £600 million over the next four years.

The FSB is concerned that the consultation lacked information on how HMRC would choose businesses and carry out the checks. Another worry is that HMRC did not draw up details of what standard criteria would be used to assess each business, and that it will be difficult to justify a ‘significant failing’, as firms across sectors differ so much.

Additionally, the document said that HMRC would raise £600 million over four years, but no breakdown of the model used to reach the figure was included, raising further concern that the process is solely going to be used to raise revenue for the department.

The FSB has recommended that the charging process is left as it currently stands, and that small firms are given the opportunity to improve their records if processes are deemed inadequate. It would not be fair to impose a ‘first offence’ penalty, where the business is unaware of the offence that has been committed.

Guidance should also be produced, so that all small businesses know what actions they can put in place to ensure they are compliant.

Roger Bibby, FSB Economic, Tax and Finance Committee Chairman, said:

“FSB research has shown that one in 10 small firms spends more than six hours per week fulfilling their tax responsibilities. However, many small businesses do not have a dedicated finance or accounting department and will be unaware of the intricate details of tax obligations – especially when starting out.

“Rather than imposing fines which could cripple some small firms, it would be more pertinent for HMRC to move to a system where small businesses are encouraged to improve record keeping and understand their tax obligations better.

“At a time when the Government is looking to promote growth and get the recovery on a firmer footing, adding to the bureaucracy that a business owner has to deal with through additional checks, goes against what the Government is trying to achieve.”

ENDS

Notes to Editors

1. The FSB is Britain’s leading business organisation with over 210,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

2. To view a copy of the letter sent to HMRC, visit www.fsb.org.uk

3. FSB ‘Voice of Small Business’ survey panel has shown that:

Three fifths of small businesses believe the UK taxation system has a negative impact on their ability to take on more staff. A third say this is detrimental to their capacity to make capital investment in the business.

Half of businesses spend less than two hours per week on fulfilling their tax responsibilities. But for one in 10, this takes up more than six hours of their time.

Two thirds employ an external professional to complete their tax return. Three fifths do the same with their annual accounts.

Members spend an average of £3,000 per year on professional financial services. Almost three fifths spend more than £1,000 annually on this.

Two thirds would not feel confident in dealing with their business’ tax without professional help. Six per cent would be very confident (including some FSB members who are tax specialists by profession).

Three quarters believe simplifying the tax system would have a positive impact on their ability to grow their business.

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Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121/ 07825 125695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk/regions