HMRC raises an extra £3.5bn from small businesses for underpayment of VAT, says tax investigation insurance company PfP

Freya Wood
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HMRC is likely to increase the pressure on small businesses (Source: Getty)

HM Revenue and Customs (HMRC) has raised an additional £3.5bn in the last year through inquiries into the under-payment of VAT by small businesses, tax investigation insurance company PfP said today.

Increased VAT revenue accounted for 45% of the additional tax take in 2014/15 from investigation by HMRC’s local compliance teams, according to PfP.

The teams, which are responsible for small and medium-sized businesses, raised a total sum of £7.7bn last year.

PfP says this trend is likely to continue, as the government pushes to maximise tax revenue. It added that a small number of SMEs evade VAT, placing those who make innocent mistakes in their returns in the firing line.

“A ‘hardcore’ of tax-evading small businesses are making life difficult for the vast majority of compliant SMEs, and leaving them facing investigations over genuine oversights and errors,” Kevin Igoe, Managing Director of PfP, said.

“Through no fault of their own, a lot of small businesses are coming under greater scrutiny, and facing expensive and time-consuming investigations,” Igoe said.

Pressure on SMEs is likely to rise as HMRC plans the closure of 170 regional tax offices in favour of 13 “hubs” and the further use of specialist taskforces.

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