HM Revenue and Customs is taking a "draconian" approach to previously overlooked tax areas such as employee benefits in order to raise revenues, a firm of chartered accountants is warning.
UHY Hacker Young tax partner Roy Maugham said while areas like PAYE and VAT had always been scrutinised, HMRC was looking more closely at issues such as corporate entertainment and employee benefits such as private health care, company cars or company-subsidised fuel costs.
"HMRC's take on employee benefits is increasingly draconian, for example. They're looking for any minor compliance slip by a business: whether it has reported the right thing at the right time, or challenging whether company cars are genuinely being used for company business at any given time," he said.
A desire to increase tax revenue is behind the change in HMRC's strategy, the firm suggested. It found the extra tax yield from compliance investigations into small and medium-sized businesses rose by 39% over the past year, from £311m in 2010-11 to £434m in 2011-12.
Chartered Institute of Taxation president Patrick Stevens said in general HMRC was moving more resources into tracking down areas where compliance had been "less than perfect".
"This is partly because the country, like most others, needs to raise more tax in current economic times and partly because that is the direction of travel for our UK tax authorities generally. They have announced crackdowns on certain industries in certain geographical areas and in some cases limited amnesties have been offered."
Nevertheless the potential employee benefits offer for tax revenues may not be as large as it seems. In August, COVER sister title, WSB, reported the number of taxable employee benefits had fallen by 300,000 since 2004.
