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HMRC and “Mid-Size Businesses”

In 2014 HMRC published the findings of some research it had carried out into “mid-size businesses” (by which they mean businesses with £10m – £200m turnover and at least 20 employees. Gosh, they must mean us!). Some findings were obvious (“mid-size businesses are an important contributor for the economy”): others were questionable on several levels (“Some mid-size businesses want and need enhanced engagement to better facilitate the resolution of issues and to achieve certainty on more complex issues, such as life events encountered for the first time”).

As a result, HMRC announced that it had begun “transitioning to a new strategic approach based around the research insight” (depressing, yes, but we think it probably means “change how we work”) and through “flexible deployment of HMRC’s resources” (ah, that again) to “deliver tailored support”. All very positive-sounding, though we suspect that most mid-sized businesses have quite enough contact with HMRC already, thank you very much.

“All of this will enable HMRC to ensure businesses pay the right amount of tax at the right time”. Now we come to it: call us cynical but we don’t envisage that HMRC will be devoting a huge amount of resource to ferreting out mid-size (or any other) businesses which are paying more tax than they should. Rather, cue increased HMRC interest in mid-size businesses.

And that has, indeed, been our recent experience. “Business teams” are being set up covering all the main heads of tax including Corporation Tax, Income Tax, VAT and Payroll Taxes. Expect to receive a request for an initial meeting to find out the structure of the business and who HMRC need to contact to review the records. Any review is likely to involve checks utilising increasingly sophisticated analysis and data interrogation tools. Checks we have seen include, for example, combing records for words associated with entertainment– “golf”, “rugby”, “drinks”; and then testing that the associated costs have been dealt with correctly: but HMRC’s data tools are capable of so much more.

Don’t get us wrong: we’re all for collaborative working with HMRC and we don’t aim for conflict for conflict’s sake. But for all the touchy-feely “enhanced engagement” and “better facilitation” don’t ever fall into the trap of thinking for one moment that in these cash-strapped times HMRC and your professional tax advisers are or should be on the same side.

If you find HMRC getting a little friendlier than you are comfortable with and would like someone to talk to, try BKL. Either your normal contact partner or our enquiry form.