HM Revenue & Customs got absolutely roasted by the media following the publication of the Committee of Public Accounts Report which revealed a scandalous story involving the usual suspects: big business, money and Sachs.
The headline surrounds the accusation that HMRC are currently trying to resolve tax issues valued at over £25 billion with large companies. There is also controversy surrounding a 'mistake' involving Goldman Sachs, which an HMRC whistleblower claims may have cost the taxpayer anything up to £20 million.
HMRC refuted the tax disputes figure of £25 billion, citing that the figure is "not tax owed" but "potential tax liabilities". They also believe the Goldman Sachs 'mistake' to be somewhere between £5 and £8 million.
I'm guilty of being an accountant by trade and my professional focus is on small businesses. We've seen waves of people starting up their own business because of pay-freezes/cuts and redundancies. But on the flip-side, we are seeing plenty of victims of the recession too. 31 January marks the tax return deadline and I fear that we haven't seen the full scale of the devastation yet. I have this dread that we're going to find when we call that client that we haven't heard from all year, that they've gone out of business and can't afford our services anymore.
So things are really hard for small business right now. The mountain of red tape is gargantuan, staff costs and employer responsibilities are ever increasing and it would be easier to find a unicorn than successfully obtain funding in this climate.
The Committee's Report interests me because the tax return deadline will no doubt lead to a flood of calls to HMRC's Business Payment Support Service (BPSS) and Time to Pay Scheme (TTP). If you've never had to use these services before, they are there for individuals and businesses that are experiencing difficulties in paying their tax on time and in full. Although such arrangements don't necessarily offer reductions in interest and penalties, they allow the taxpayer to set up a payment plan. A payment plan may seem trivial, but for small businesses they can be a lifeline and mean the difference between sinking and swimming.
Over 60% of TTP arrangements granted from December 2008 to June 2011 were for amounts under £10,000. It's therefore likely, that most applications are made by small businesses. But as Austin Mitchell said when examining Dave Hartnett on the Goldman Sachs case, "you [HMRC] would not give such an advantage to any small business that is hounded and punished for interest payments". Shock horror, Hartnett didn't address this comment, and there were several other similar comments that he side-stepped.
HMRC claimed in their press release that they were "not too lenient on large businesses". Yet with another breath they state that large businesses pay around 60% of the total UK tax receipts of £13.9 billion. Was this justification to 'go easy' on large businesses because they already contribute heavily to the system??
After all, Goldman Sachs got away with not paying a tax liability of £24 million for five years, and when they did eventually cough up, they didn't pay any interest. This story absolutely infuriates me. TTP arrangements are becoming harder-and-harder to obtain. HMRC are asking for details of assets, cashflow forecasts, management accounts, assurance that taxpayers have sought additional funding such as overdraft extensions and loans, etc. And yet TTP arrangements very rarely last longer than one year- let alone five!
Mrs Forster, a small business owner, recently won a case against HMRC involving VAT. But she was only able to defend herself because she had taken out insurance thanks to the advice from her accountant that covered legal fees in the event of HMRC enquiries. For some ludicrous reason, legal fees are not recoverable from HMRC- even if an appeal is won!
So unless you have a contingency plan, small business owners don't stand much of a chance in the face of an enquiry. Big businesses can not only afford the legal experts to challenge HMRC, but let's face it; the cards are in their hands because they are such big contributors to the tax pot. They've got HMRC over a barrel!