Recently announced is the intention to extend a pilot scheme from the HMRC for business tax record checks on missing tax from contractors who work via limited companies.
The Tax man Is Coming
The HMRC are seeking to plug a ‘tax gap’ of an estimated £35 billion. It is looking for the difference in tax payable between what the HMRC thinks it should be collecting and the actual amount collected in tax revenue. Last years checks of 12,000 will be ramped up to 20,000 which are provisionally planned for 2012/13.
Richard Summersgill, director of local compliance, commented that;
While supporting businesses, the intention of the exercise was to reduce the UK’s tax gap.
The pilot scheme was set to be extended if it was successful in uncovering missing tax which has not been paid. The HMRC business tax record check scheme is aimed at UK Contractors working through limited companies who are responsible for their own tax returns. Discrepancies for extreme cases of mismanagement will incur a fine of up to £3,000. However, the HMRC have said that this will not be in place until the checking process is fully refined.
Small and medium-sized businesses are the target for this exercise where the HMRC estimate that around 44 per cent of businesses’ records had errors in their tax returns. Within that, 12 per cent were claimed to be keeping records that were “seriously inadequate.”
Tax Returns 2009/ 2010 Are Targets
Before the end of the financial year, HMRC plans have checked the records of 12,000 businesses. The HMRC business tax checks scheme, was piloted in eight towns and cities across the UK in March 2011, included Edinburgh, Liverpool and Manchester. Plans are afoot to roll out the scheme nationwide. The scheme has employed cold callers to offer business owners the chance ‘to offer to talk them through some of the main things they need to know as a new business and to signpost the available help online’.
However, TAX experts are questioning the legality of the business tax record check. The Chartered Institute of Taxation (CIOT) believe that:
“HMRC has still not provided any satisfactorily clear reasoning to justify its belief that it can charge penalties in-year before the return goes in. In our view it is questionable whether HMRC has the power to do that.”
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