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SMEs Being Hit by HMRC Clampdown on Payroll Tax Mistakes

Written by: Keith Tully

Reviewed: Tuesday 17th May, 2016

Pressing the payroll button on the touch screenSmall and medium-sized enterprises (SMEs) around the UK are being particularly impacted by HMRC’s clampdown on errors relating to payroll taxation.

That’s according to the accounting firm UHY Hacker Young, which estimates that HMRC’s extra focus on payroll tax-related errors in recent months has resulted in it recouping an additional £737.3 million for the Treasury.

Of these amounts, around £373.4 million is believed to have come from SMEs, which equates to roughly 50 per cent of the extra payroll tax money taken by HMRC, if UHY Hacker Young’s figures are correct.

And given that SMEs only account for around 11 per cent the UK’s total payroll, the contribution of small and medium-sized companies to these extra tax revenues is being seen as a reflection of their struggles in negotiating the tax system as it stands.

“SMEs are being chased for a totally disproportionate amount of underpaid payroll tax, compared to their larger counterparts. But much of the underpaid tax is due to genuine errors. This strongly suggests the government needs to simplify its systems to help SME avoid mistakes,” said Rob Maugham, a UHY Hacker Young tax expert.

“While SMEs will be reluctant or unable to pay for expert advice, they are clearly struggling to navigate the tax system as it stands,” he said.

Maugham went on to say that while some SME bosses will be deliberately aiming to get away with paying less payroll tax than they are obliged to, most instances of underpayment will be the result of honest mistakes and administrative errors.

Businesses employing people on flexible terms or via umbrella companies were given as examples of situations in which it is not always straightforward for organisations to determine precisely where they are or are not liable for payroll taxes.

“While some may be actively looking to avoid paying tax, in their vast majority, SMEs will simply be tripping up on a complex tax system,” said Maugham, who also pointed out that HMRC investigations into these issues can be extremely disruptive and expensive for SMEs that become the subject of them. 

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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