HMRC has come under fire from two organisations over its proposals to “spot check” SMEs and umbrella companies for flawed record-keeping.
The Institute of Chartered Accountants of Scotland (ICAS) has trenchantly criticised the HMRC plan to visit 50,000 companies in the UK every year for the next four years, largely because it believes the cost has been badly underestimated by the Revenue. ICAS would support the scheme if it were properly targeted but thinks that claims about the magnitude of bad record-keeping are unsubstantiated.
The cost of a half day visit from an HMRC inspector has been estimated by the Revenue as £54. ICAS considers this a gross underestimate; when other costs are taken into account –business disruption, the cost of accountancy advisers, and an additional one hour preparatory meeting with the business owner and company accountant – the actual figure rises to £562. This is over ten times the amount estimated by HMRC.
ICAS considers the punitive approach to be misguided and believes HMRC resources would be better deployed in helping small businesses cope with the mass of regulations and bureaucracy confronting them.
The Federation of Small Businesses (FSB) has joined ICAS in criticising the scheme, pointing out that the Revenue fails to explain how it will select firms for checking and makes no mention of standard criteria for assessing the businesses investigated. Both the FSB and ICAS believe that penalising SMEs for a first offence is unduly harsh. They maintain that businesses should only be fined if they fail to heed HMRC advice for improvements.