Value Added Tax (VAT) is becoming an increasingly important way for HMRC to increase its takings when it comes to the investigation of small businesses or contractors.
Figures obtained by a Sunday newspaper show that VAT makes up 49 percent of the extra tax HMRC takes from investigations into small or medium sized firms.
Although only a small increase, this is a steady flow of additional money into HMRC’s coffers. Previously, VAT accounted for 45 percent of additional tax obtained by HMRC’s compliance teams.
Data for the tax year up to April 2017 indicate that the amount of additional VAT is not increasing. These figures come from PIP, a tax investigations firm.
In previous years, HMRC gained an extra £3.5 billion from companies that were breaking VAT rules. For the latest tax year this figure is just £3.4 billion.
However, it is likely that HMRC will continue to focus on small to medium sized businesses as it has been successful in raking in additional income from SMEs.
Kevin Igor of PIP said “The taxman is prepared to use all means. The Connect database and taskforces – as well as more aggressive tactics such as Accelerated Payment Notices and property raids.”
To help companies with their VAT returns, HMRC has produced a number of webinars. The first webinar was the most basic covering what VAT schemes are and what companies should do once they have registered for VAT. Later webinars covered questions on completing VAT returns and what record-keeping is required by the VAT rules.