The Forum of Private Business is advising small companies to safeguard themselves against heavy fines by reporting all business changes to HM Revenue and Customs (HMRC).
This follows reports that a small undisclosed firm has been threatened with a £10,000 fine after failing to inform HMRC that it had changed from a partnership to a limited company, thus adding ‘ltd’ to its name.
Despite the company maintaining the same VAT number and continuing to pay the correct amount of tax, the firm was originally faced with a £30,000 penalty for failing to adhere to VAT notification obligations.
Following intervention from accountants and the Forum of Private Business’ tax adviser Andrew Needham, the fine was reduced to £10,000 and further work is currently in motion to reduce the penalty further.
Needham fears that HMRC’s actions could have a detrimental effect on other small business owners, unless they act quickly to protect themselves from similar penalties.
He said, “If this is carried through and sets a precedent it could result in huge fines being imposed on small businesses which, in reality, have done very little wrong.
“It is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated – but this heavy-handed approach is the very opposite of the support that is desperately needed at this difficult time and HMRC risks further alienating firms hit by its disproportionate, targeted business records checks regime and widely-reported poor levels of service.”