British businesses locked in disputes with HMRC over possible unpaid tax
More than half of British mid-sized firms are locked in disputes with the taxman over potential unpaid tax, a sign of the troubles companies encounter when trying to navigate the UK’s complex web of levies.
Some 61 per cent of 500 firms surveyed by consultancy BDO are embroiled in a tax dispute with HMRC.
Tax disputes are often drawn out processes that eat up resources for both the business involved and the tax authority.
BDO pointed out that in HMRC’s annual report the organisation said it takes on average 36 months for large businesses to resolve an enquiry. There were also 39,500 open tax tribunal appeals at the end of March, an eight per cent jump from the previous year.
The high proportion of businesses engrossed in a battle with HMRC has likely been engineered by the complexities embedded in Britain’s tax system.
Critics have argued simplifying the regime could prevent companies from not paying tax they are unaware they are exposed to, which would reduce strain on HMRC staff workloads.
Not only do companies have to work through a network of taxes and allocate time and money to resolving disputes with HMRC, they are grappling with more punitive tax rates.
The top rate of corporation tax – a levy imposed on company profits – jumped from 19 per cent to 25 per cent in April.
Experts also pointed out that handing over more money and personnel to HMRC could help the organisation work its way through cases quicker. Investigations by the taxman into potential unpaid tax yielded £34bn last year, up from a little over £30bn.
Talia Greenbaum, BDO partner, said: “The UK’s tax system can be very complex and difficult to navigate, so it’s no surprise that this can result in business tax disputes. Simplifying and modernising the system would certainly help to reduce these difficulties.”
“There is also a strong argument for giving HMRC more resources which would enable it to offer a better service to small and medium-sized businesses, the vast majority of whom simply want to pay the right amount of tax.”
The debt pile is about the same size as the entire economy.
Companies and individuals can apply to have a professional work with the HMRC officer overseeing their dispute to explore more efficient ways to resolve the probe, known as an Alternative Dispute Resolution.
An HMRC spokesperson told CityAM: “We recognise the importance which mid-sized businesses bring to the UK and have focused our efforts on developing customer insight to better understand the needs of this diverse group and the challenges they face.”