Small firms could face incentive payment claw-back, accountants warn
HM Revenue & Customs has come under fire following a statement that small companies that have filed their PAYE returns online may have their incentive payments stopped or withdrawn.
Accountants said the move was a "petty attack", and warned that it would present a further blow to small businesses that have struggled with the online systems, believing that the incentive payments would offset their administration costs.
HMRC announced that, following legal advice, it had re-interpreted the anti-avoidance provisions on cash incentives given to employers that file online.
The announcement suggested that small businesses that have filed online could lose up to £500 for returns they have already submitted and a further £325 for filing PAYE returns online in the years up to 2010.
The anti-avoidance rules were introduced in March 2005 to prevent large organisations from dividing themselves into several small companies in order to make multiple claims for the £250 incentive payments.
However, in its latest announcement, HMRC said that it would now be interpreting the rules strictly and would deny the payments to any company where it considers that the company was formed to obtain "an advantage in relation to income tax, corporation tax or national insurance contributions".
"The way this announcement is worded, stating that HMRC 'will withdraw or prevent payment' of the incentive, suggests that payments already made will be clawed back," said leading accountant Peter Penneycard.
"If the government does not like the tax laws that govern small companies then it should change them – not make petty attacks that move the goalposts after the match has started. Few small business trust HMRC as it is: this sort of announcement is hardly likely to encourage them to cooperate with HMRC in the future."
A spokesman for the HMRC said that the announcement sought only to clarify the existing rules, and prevent ineligible claims from being made. Money would only be taken back "in the event of people making ineligible claims", he said.
