This week we broke a story about how a small business was punished by HMRC for failing to notify them of a name change.
The ‘punishment’ was initially in the form of a thumping £30k fine. Yes, that’s £30,000 pounds for what was an oversight.
In fairness to HMRC – not that they really deserve any – this was reduced to £10,000 on appeal, but in the current climate, this is still a crippling amount of money to any small firm battling through one of the worst recessions in living memory.
Does this really sound like a fair and fitting punishment by a government department? The company had, after all, an exemplary record for paying its taxes, nor had it filed an incorrect tax return.
No, it had made a simple, old fashioned mistake, and the Revenue came down on them like a ton of bricks.
We suspect that if we were to ask the question of HMRC, there would be many more cases like this. This, quite frankly, is a disgusting and disproportionate response to nothing more than a misdemeanour.
So, exactly what law had the company in question broken? They were in breach of VAT notification liabilities contained in the Finance Act 1985, and the VAT Act 1994.
The fine was actually 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 regardless of the fact the revenue did not lose out on tax payments.
From past form we suspect it’s highly unlikely that HMRC will be changing their heavy handed ways on this anytime soon, so it’s crucially important that all small businesses are aware of the consequences of violating the ‘rules’.
Our advice is simple and clear: if in doubt, seek professional advice. Forum members can always contact our helpline for specialist advice in this area.
Ironically, as part of our headline Get Britain Trading 2012 campaign, our Business Buddy small business ‘work experience’ programme was extended to include tax inspectors as well as politicians, in order to give HMRC officials insights into the challenges and opportunities facing small businesses.
Quite clearly, the Revenue still has much to learn.
If there are any small business owners out there who have had a similar experience we would like to hear from them, either by 01565 626 016, or by email at firstname.lastname@example.org