SMEs may face challenges in tax avoidance clampdown
HMRC’s clampdown on tax avoidance schemes could mean that small businesses in the UK are at risk of demands for hundreds of thousands of pounds.
HMRC is stepping up repayment demands and has said it expects to issue 40,000 more nationally by the end of next year.
Partner at Begbies Traynor, Paul Barber, explained that demands from disputed tax schemes don't just affect high profile names and big businesses.
Barber said: "Up until 2011, tax schemes were widely used by small businesses operating in sectors such as IT, finance, construction, offshore oil and gas, and property as a way to remunerate their senior staff."
"Generally these businesses were acting in line with professional advice and had no reason at the time to think that these arrangements were not legitimate. One company I know had even received a tax rebate from HMRC as a result," he added.
The disputed schemes could include different guises such as employee benefit trusts or contractor loans, as well as film partnerships.
An out of court settlement offer was made when the schemes were banned in 2011, and a recent challenge to prosecutions was rejected by the High Court.
New accelerated payment notices are now being issued by HMRC, which oblige companies to pay outstanding amounts within 90 days. So far, this measure has raised £1 billion in tax, and the Treasury aims to increase that to £5.5 billion by March 2020.