Small firms face ‘onerous’ VAT crackdown


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HMRC’s crackdown on VAT abuse is having an ‘onerous’ impact on small firms according to a report in FT Adviser.



The publication cites statistics which show that, in 2012-13, HMRC’s total VAT take was up by 51% compared with the previous year.


HMRC took £5.3 billion from small firms over the course of the year, an increase from £3.5 billion – and in the past three years, HMRC investigations have now taken an additional £8.4 billion from small firms.


This compares with £3.9 billion raised by scrutinising big firms, and shows the onerous imbalance of the current clampdown towards enforcement against small companies.


Kevin Igoe, managing director of business and individual insurance specialist PfP, told FT Adviser: “We are seeing an increase in VAT compliance activity across the board.”


“Failure to correctly deal with VAT, even if not deliberate, could result in hefty interest and penalty charges,” he added.


But with complex arrangements governing when VAT is payable, when it does not apply, and when services are exempt from it, firms might feel they have a legitimate reason for being unaware of some of the finer aspects of the VAT regime.


This is particularly applicable to small firms, who might not have an experienced in-house financial or legal team for such issues – and may explain why the crackdown has recovered much more from them than their larger counterparts.

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