South East agricultural firms facing increased insolvency risk
HMRC efforts to tackle the underpayment of VAT has seen an additional £3.4 billion collected from small and medium sized businesses.
According to PfP, it means VAT revenue from SMEs accounted for 49% of the additional take from HMRC’s compliance teams.
The crackdown on tax evasion in 2016-2017 means the figure is up from the previous year, when 45% of the total VAT came from SMEs.
SMEs can face significant disruption from HMRC inquiries into potential mistakes on tax returns, while the process can also be both costly and time-consuming, especially if a business lacks contingency plans to cover such eventualities.
Given the high figure of finance raised from SMEs, it highlights that a significant number have not been fully complaint with tax regulations.
Fines can be implemented for incorrect tax returns while HMRC also uses its Connect database to identify those that are underpaying.
As the software has access to banks and other financial institutions that are based in overseas territories, there is a wealth of information available to catch offenders.
Given the current economic climate, there are a number of reasons why a business may struggle to meets its obligations – the key though, is to act early.
A range of HMRC time to pay services are available to assist firms who are struggling to overcome unexpected or difficult situations.
Rather than ignoring the issues – which is an all too common occurrence – businesses should consider how to deal with payment demands from HMRC, unfair penalties, the threat of bailiffs and even winding up petitions.
Provided swift action is taken, solutions should be available that can offer the best outcomes for the businesses concerned.
VAT rates in the UK could potentially be altered in the wake of Brexit according to the Association of Accounting Technicians, although at this stage it is unclear if the government will raise or low the rate of 20%.
By Phil Smith