SMEs warned to keep tax authorities up to date

The Forum of Private Business (FPB) has warned small companies to keep the tax authorities informed of any changes they make to their business, after it said an SME was threatened with a £10,000 VAT fine following a name change.

The small business support group warned entrepreneurs “to fully update HM Revenue & Customs (HMRC) about any changes to their businesses, no matter how small”, after reports that a firm with an “exemplary record of VAT payments” was left facing punitive sanctions for not informing inspectors that it had changed its name.

However the HMRC denied it slapped fines on firms for not telling the organisation they had changed their names and called on the FPB to provide more details about the case “to ensure it had been correctly handled”.

The FPB said the SME, which did not want to be named, had originally been hit with a fine of more than £30,000 under VAT notification liabilities contained in the Finance Act 1985 and later the VAT Act 1994.

The fine was imposed after the business changed from a partnership to a limited company – adding a ‘ltd’ to its name – without informing HMRC, despite it retaining the same VAT number and the fact that the revenue did not lose out on tax payments.

The fine was reduced to around £10,000 after intervention from accountants and the FPB’s tax adviser Andrew Needham, who is working to reduce the penalty still further.

Needham said he was concerned the situation represented a change in HMRC’s long-standing policy of waiving its technical ability to impose a penalty fine in such circumstances.

“If this is carried through and sets a precedent it could result in huge fines being imposed on small businesses which, in reality, have done very little wrong.

“It is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated – but this heavy-handed approach is the very opposite of the support that is desperately needed at this difficult time,” he said.

“HMRC risks further alienating firms hit by its disproportionate, targeted business records checks regime and widely-reported poor levels of service.”

Despite the FPB’s claims an HMRC spokesperson told PRW that the tax authorities did not charge a penalty “just because a business hasn’t told us they’ve changed their name.

“There can be a penalty when we are not told about a more fundamental change, such as a transfer of ownership where the new owner does not register for VAT on time. But we always take the exact circumstances into account.

“If the FPB lets us have details of the case we will of course look into it to ensure it has been correctly handled.”

[ Back ]