We were all outraged to discover that some of our favourite brands like Starbucks, Amazon and Google had been tax shamed and exposed as under-cutting the corporate tax system that every business owner faces.
Research by UHY Hacker Young showed that after HMRC clamped down on VAT investigations, a whopping £3.9bn was taken from UK businesses – 10% higher than the previous year and almost double than three years ago. Whilst HMRC can be commended for clamping down on tax avoidance, tax specialists have criticised HMRC of having double standards by taking every penny from SMEs and securing any unpaid tax but turning a blind eye to the largest businesses to avoid lengthy cases over corporate tax avoidance.
Small companies are often teamed with a smaller budget and are less likely to employ an accountant to deal with the financial side of business. They are also more likely to file their own tax returns which can often lead to simple human errors; errors that the taxman has been highly unforgiving with. HMRC – which has been under a great deal of pressure to minimise tax avoidance after the exploitation of unpaid taxes amongst large multinationals – has been accused of targeting smaller firms and penalising them over trivial issues whilst bypassing blatant tax avoidance amongst large firms.
“HMRC has taken an increasingly hard line over the last year in its attempts to increase tax receipts, so more and more small businesses in particular are finding themselves facing investigation over VAT arrangements that have long been accepted by the tax authority,” said Simon Newark, partner at UHY. “Unfortunately, the law is heavily weighted in HMRC’s favour. Once they make a decision it is irrelevant if the decision is right, wrong or even unlawful. Unless the taxpayer challenges it, the decision will be enforced by the full might of the State with bailiffs if necessary.”
SMEs are disadvantaged by large companies utilising customer relationship managers appointed by HMRC, giving them the power to negotiate their own tax bill whilst SMEs sought the expertise handling of their local tax office.
It looks like its one rule for one and another rule for the other when it comes to tax avoidance.