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Man up, taxman! Stop picking on small businesses over big ones

photo courtesy of Images_of_money

HM Revenue and Customs has been accused of targeting smaller businesses while allowing large corporations to get off lightly when it comes to accurately paying their tax dues. That’s according to a parliamentary report that states HMRC appears to “lose its nerve” when facing powerful global brands (Starbucks, anyone?), but has no such inhibitions when its attention turns to SMEs further down the food chain.

Margaret Hodge MP, chair of the Public Accounts Committee, has called foul on this imbalance: “HMRC holds back from using the full range of sanctions at its disposal. It pursues tax owed by the smaller businesses but seems to lose its nerve when it comes to mounting prosecutions against multinational corporations.”

At Small Biz Heroes, we think this amounts to no less than schoolyard bully tactics, so we spoke to some small businesses to get their reactions to the HMRC letting large corporations get by without paying their far share.

What do small business owners think?

Anthony Shapely, MD at Cyber Compare, commented: “A lot of small online firms do indeed feel victimised by the taxman (us included), and let down by successive governments in closing the international tax loop holes. The tax savings large corporations like Amazon and Google are making allow them to create much larger profits, resulting in much greater reinvestment. Over a few years this puts an online store like Amazon or advertising platform such as Google leaps and bounds ahead of any of its competitors who might be playing fairly.”

Regarding the disproportionate pressure being applied to small companies, Charlie Mullins, the founder and MD of Pimlico Plumbers, said: “You only have to look at the list published earlier this year of companies and individuals who have fallen foul of the good people at The Revenue: a plumber, hairdresser and building firm fined about £10,000, £17,000 and £35,000 respectively. These are not the big ticket tax avoiders and evaders that we want to see named and shamed – and if HMRC thinks they are, then the real bad guys will continue to laugh all the way to the bank, most likely in Belize!”

Moves in the right direction?

The government has, however, made promising moves on lessening the tax burden on small business. At this year’s Budget we heard that small businesses will benefit from the introduction of an employment allowance which is expected to leave a third of all employers paying “no jobs tax at all” when it comes into effect next year.

So there are benefits to be had for small businesses, but you have to be savvy to make the most of them. Scott Brown, MD Accounting at Sable Group, which helps SMEs with their tax planning, commented:

“There are many ways for small businesses to minimise their tax liabilities, but it can be a tricky landscape to navigate. By keeping abreast of changes to tax legislation, seeking out the best up-to-date industry knowledge, and taking advantage of the incentives that apply to SMEs in their sector, small business owners can reduce the tax owed to HMRC.”

George Osborne reiterated in his Autumn Statement that “business taxes are still too high”, and SMEs are hearing promises of fair treatment, with corporation tax for big business set to be cut to 20% by 2015, equalising the rate applied to large and small businesses for the first time in over 40 years.

Maybe the taxman missed the memo on even-handedness. Pick on someone your own size, HMRC – or pick on everyone equally, at least!