Payroll Tax ‘Mistakes’ Cost Small Businesses Extra £373m

Flexible workforces and a tendency to take on casual labour suggested as reasons why small firms are falling foul of tax compliance

Payroll Tax ‘Mistakes’ Cost Small Businesses Extra £373m

Small businesses have paid a whopping £373.4m in additional tax across 2014 to 2015 after an investigation into tax avoidance and return errors was launched by HM Revenue and Customs (HMRC).

A report from UHY Hacker Young has claimed that small businesses have been hit particularly hard by the crackdown, with these tax ‘mistakes’ accounting for over half of the additional sums collected – despite being responsible for only 11% (£96bn) of total UK payroll.

This is in stark contrast to larger companies who paid the comparatively low figure of £363.9m, despite making up 89% of the payroll.

The tendency to take on casual labour, operate as umbrella companies and run flexible workforces have been given as possible reasons as to why small businesses are falling a foul of tax regulations, with many small firms finding it difficult to work out what exact tax bracket they fit into.

Furthermore, UHY has suggested that a reluctance to employ someone with accounting expertise and an overly complex tax system has led to many business owners making mistakes on their tax return forms.

Roy Maugham, tax partner at UHY Hacker Young, said:

“Small businesses 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 small businesses avoid mistakes.

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

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