HM Revenue & Customs collected an extra £3.4billion in VAT revenue from small- and medium-sized businesses as the body recovers underpayments in VAT as well as part of its crackdown on tax evasion.
The total amount of additional tax revenues recouped from SMEs which was made up by VAT revenue increased 4% on 2015-16 to 49% in the tax year 2016-17.
The extra funds were recouped following HMRC investigations into SME tax compliance.
Earlier this year, it was made known that HMRC would use two newly created teams: the Individuals & Small Business Compliance unit, and the Wealthy & Mid-sized Business Compliance unit, to investigate VAT contributions made by SMEs.
What this means for businesses
Small- and medium-sized businesses should ensure that they are complying with tax implications to avoid disruptive, costly and time-consuming HMRC investigations.
There are a a small number of small- and medium-sized businesses that do look to avoid tax, therefore giving HMRC ample reason to scrutinise SME’s tax returns, and amplify what could be small honest errors in tax returns.
VAT is a lucrative channel for HMRC in tax revenues, therefore the taxman is likely to use all means at their disposal to ensure that the proper amount is recouped, and has widened its net in recent years.
Businesses, therefore, should look to ensure that their tax returns are accurately prepared, ensuring that they avoid any extra correspondence and investigations which can put stress on a business’ operations and time.
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