HMRC figures released today show the IRS believes small businesses are now responsible for 56% of the ‘tax gap’ in the UK – a total of £20.2 billion in one year*, says multinational law firm Pinsent Masons.
This number has now risen for four consecutive years. Small businesses were thought to be responsible for just 40% of the tax gap in 2017/18 – a total of £12.8bn.
“HMRC is really turning its attention to small businesses,” says Stephen Porter, Partner and Head of Tax Disputes and Investigations at Pinsent Masons. “They’ve worked hard to reduce the amount of tax that large corporations and high net worth individuals don’t pay – but there’s still a lot of work to do.” To be done on small and medium businesses.”
“HMRC’s focus on large corporations and the wealthy means that small businesses get less attention. Small business investigations often take longer to complete and problems can drag on for years.”
“For example, there are cases of small businesses continuing to use tax evasion schemes for years after they were effectively eliminated among large, high net worth companies.”
“Small businesses that don’t comply with taxes shouldn’t be surprised if they are investigated by HMRC over the next couple of years. That is clearly the direction that HMRC seems willing to go based on these numbers. A way out of this problem would be by getting Getting professional advice is a very good idea at this point.”
Pinsent Masons add that the UK’s overall tax gap has held steady at 4.8% of all taxes due in theory, the same figure as last year.
The tax gap measures the difference between the amount of tax that should, in theory, be collected by HMRC and what is actually collected. Much of the gap will relate to avoidance and evasion.
