HMRC showing businesses little leniency

News Article - 25 January 2010
Category: Business

A recent report suggests HMRC is pushing businesses into insolvency, with the government department behind almost half (43%) of wind-up petitions. As the economic downturn persists, commentators believe HMRC's priority is to increase tax take and maximise debt recovery.

In recent weeks, HMRC has been involved in several high profile winding-up cases. Cardiff City football club is currently faced with the prospect of a second winding-up order because of an unpaid tax bill. A previous order was dismissed by the High Court after an agreement was reached with the taxman. However, it will be reinstated if payment is not made in full by February 10th.

The increase in government winding-up orders is not the first display of aggression from HMRC. In November 2009, they were seen to be focus on pursuing companies accused of artificially setting low prices on internal contributions transfers to reduce taxable profits. In an April 2009 ACCA survey 89% of respondents believed HMRC were more aggressive than ever, and expected more tax disputes to arise than ever before.

The taxman has been under pressure in recent months to balance an increase in tax take with leniency towards small and medium sized businesses who have struggled to cope with the economic downturn. The country's spiralling budget deficit, however, seems to have forced them to become more aggressive in order to maximise income.

Ian Little, Financial Director, at Access, advises organisations to re-analyse current business practices to ensure they meet required regulations.

"Businesses must ensure full compliance with tax regulations to avoid falling foul of HMRC's increasing stringency, and should not expect preferential treatment for special circumstances," comments Ian. "Financial transparency should also be encouraged to enable full accountability at the audit stage."

As the pre-election coverage gains momentum, companies must also be aware of impending legislation and rules that may change tax-related compliance regulations. Organisations that fail to adapt to new demands should expect HMRC to pursue sanctions to the fullest extent of the law. Early preparation is essential if companies are to avoid detrimental effects to reputation and profitability brought about by negative contact with the taxman.

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