Row over Revenue scare letter hots up
The Inland Revenue's attempt to help small businesses with their tax returns by sending out letters suggesting the returns could be wrong, has received further criticism from advisers and reached the attention of the national media.
As reported in UKTECH last week Revenue accused of scare tactics letter, the Revenue is sending out up to 100,000 letters to small firms alluding to an error in their business expenses. It says: "From a risk review of 2003 returns we have identified an aspect of the self-employment pages of your return which may need particular attention." The letter also warns them they could face additional tax payments with interest and penalties if there are mistakes in the tax returns.
Respected Telegraph journalist, Roland Gribben, has now highlighted this practice, claiming that the Revenue's tactics have backfired and set alarm bells ringing among companies and their advisers.
This has also upset many accountants and practitioners. George Bull, tax partner at accountant Baker Tilly, is reported as accusing the Revenue of using "shock and scare tactics" that had led many businesses to believe "they are about to receive an Inland Revenue investigation and will be charged extra tax, interest and penalties".
Simon Sweetman, tax adviser to the Federation of Small Businesses, and member of the UKTECH Ask An Expert panel is also quoted, as saying: "We told them (Inland Revenue) we didn't like it very much. It has caused an enormous amount of problems and created unnecessary tension between companies and their advisers but it is frightening to taxpayers without advisers."
The letter is accompanied by a general questions and answer paper which outlines some of the business expenses, such as use of home office and company car, which could be the area which the Revenue claims requires 'particular attention'.
However, some of the recipients of the letter claim not to be claiming any of the expenses in the Q&A, leading to concerns that this is a 'fishing exercise'.
Full article in Telegraph here: Companies rattled by tax letters