After a firm (which does not want to be identified) has been fined £10,000 by HM Revenue & Customs (HMRC) for not letting it know a partnership had become a Ltd company, the Forum of Private Business is warning small companies to remember to tell the tax man about any changes.

HMRC originally imposed fines of £30,000, but amended its demand after receiving the explanation. The company was charged under VAT notification liabilities in the Finance Act 1985 and the VAT Act 1994.

The company had retained the same VAT number and the revenue was not deprived of any money by the company becoming Ltd.

The fine was reduced to just over £10,000 after intervention from accountants and the Forum of Private Business’s Tax Adviser Andrew Needham, of VAT Specialists Ltd. They are trying to get the fine reduced further.

“I am concerned that this is a change in HMRC’s long-standing policy of waiving its technical ability to impose this penalty fine in such circumstances,” says Andrew Needham.

“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’s important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated about any changes.

“This heavy-handed approach is the very opposite of the support that’s 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.”

The Forum has criticised HMRC’s disproportionate treatment of small businesses while large companies routinely get away with widespread tax avoidance, and also HMRC’s all-round poor levels of service.

As part of its headline Get Britain Trading campaign, the Forum has extended its Business Buddy small business ‘work experience’ scheme to include tax inspectors as well as politicians, in order to give HMRC officials insights into the challenges facing small businesses.

The Forum is urging all small business owners to contact its Public Affairs team about their experiences of HMRC – especially if they have received fines they feel are unfair or disproportionate. They should call 01565 626016 or email publicaffairs@fpb.org.