A warning has been issued by the Forum of Private Business to all small businesses, to inform HM Revenue & Customs of all changes to their company. This follows a report of one company that has received a Â£10,000 penalty. The company â originally a partnership â decided to become a limited company, which meant that âLtdâ was added to the company name. Under the Finance Act 1985 and the VAT Act 1994, the company was initially issued with a Â£30,000 fine from HMRC. This was reduced to Â£10,000 following swift intervention from tax experts.
The company wishes to remain anonymous but had previously submitted VAT tax returns in a timely manner, while making all tax payments on time. Although the company kept the same VAT number and paid the correct amount of tax to HMRC, the company had an obligation to inform HMRC of any changes. Work to reduce the penalty further is ongoing.
The tax advisor for the Forum of Private Business, Andrew Needham, said that the penalty was a concern as this could be the start of small businesses being hit with huge fines, at a time when they need more support. He further added that all small businesses should be aware of reporting all changes of their company structure to HMRC. A national accountants will advise which changes to report to HMRC and will do so in a timely manner, avoiding the issue of unnecessary and costly penalties.