Essex: Priti Patel MP accuses HMRC of ‘persecution’ of small firms

AN ESSEX MP has joined fellow Tory backbenchers and small businesses in condemning HM Revenue & Customs plans to carry out spot checks on firms’ record-keeping.

Priti Patel, the MP for Witham, accused HMRC of the “persecution” of small businesses while “doing deals” with larger companies.

From April, HMRC plans to inspect up to 20,000 firms, requiring them to provide paperwork to back up their tax returns dating back a number of years.

Those unable to produce the documentation face fines of up to �3,000, creating additional difficulties for small businesses at a time when many are already under huge financial pressure as a result of the economic climate.

John Walker, national chairman of the Federation of Small Businesses (FSB), told The Independent: “Despite the worsening economy, HMRC is launching this scheme regardless of the consequences.

“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.”

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The business records checks project, 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.

Priti Patel said: “This is the persecution of small businesses at a time when they are already facing a very, very hard time.

“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.”

Anne-Marie Morris, Conservative MP for Newton Abbot, 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.”

An HMRC spokesman said: “Following consultation with representative bodies, HMRC has started a detailed review of the Business Records Checks project.

“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 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.”

In a House of Commons debate shortly before Christmas on the issue of barriers to business growth, Priti Patel said her constituency was home to around 3,800 small and medium-sized firms, which together employed around 83% of the local workfroce, around 15% above the national average.

“Jobs and growth in my constituency are disproportionately dependent upon the success of small shops and medium-sized businesses,” she said.

She praised Government moves to support growth, such as the decision to reduce the rate of tax on small firms’ profits, but said more action was required in areas including red tape, infrastructure and banking.