HM Revenue and Customs (HMRC) have been accused of harassing small commercial property businesses, with plans to conduct spot checks on their record-keeping.
Tory MPs and business leaders criticised the project to inspect up to 20,000 small commercial properties, to see if they have adequate proof of expenses and income dating back years.
Those who are unable to produce sufficient records will face fines of up to £3,000, which business leaders warn could create additional difficulties for small commercial property businesses at a time when many are already facing the prospect of bankruptcy and on a larger scale thus inhibit the economic recovery.
The Federation of Small Businesses (FSB), Chairman, John Walker, said: “Despite the worsening economy, HMRC is launching this scheme regardless of the consequences.”
He further added: “We have spoken to HMRC and expressed our concerns about this a number of times. But as far as they and ministers are concerned it is a policy aim to make this happen. There is a huge difference between the rhetoric of the Government about helping small businesses and what it is doing in reality.”
However, last month, MPs requested that HMRC should be more open about its dealings with larger commercial property companies, claiming there are £25 billion of outstanding tax issues with these firms.
Dave Hartnett, permanent secretary for tax was singled out for claims that he failed to handle tax negotiations properly with some major commercial property firms.
Another project, the business records check, which was piloted last year, also attracted criticism from Conservative backbenchers who pointed out that HMRC had recently let banking giant Goldman Sachs off part of its tax bill.
Speaking of the project, Tory MP for Witham, Priti Patel, expressed: “This is the persecution of small businesses at a time when they are already facing a very, very hard time.”
She further added: “The attitude of HMRC to small businesses is frankly disgraceful when they are blatantly doing deals with large firms which have allowed them to escape millions of pounds in tax liabilities. It seems as though HMRC sees small businesses as low-lying fruit to meet their targets. That kind of persecution is outrageous.”
Conservative MP for Newton Abbot, Anne-Marie Morris, added: “It is simply not practical for a company employing just a few people to spend huge sections of their day on administration as well as getting their firm off the ground. This is particularly true when you’re coming out of a recession.”
However, defending their project, a spokesman for HMRC stated: “HMRC recognises that the launch of the Business Records Checks pilots has caused considerable concern to the tax profession, and that the project would have benefited from more detailed consultation with tax professionals at an earlier stage. In the light of these concerns, HMRC will undertake a strategic review of the project, in consultation with the professional and representative bodies.”
The spokesman further added: “The findings of the review will be shared with representative bodies in January 2012, and final decisions will be made by HMRC before the end of the current financial year.”