Why hasn’t there been more of a fuss over the absence of any UK tax payments by Vodafone on the £84bn proceeds from the sale of its 45% stake in Verizon Wireless?
Well my understanding is that Vodafone does not believe any tax would have been payable, even if the assets had been held in the UK, and not via a Dutch holding company.
That is because the last Labour government’s 2002 Finance Act introduced an exemption from tax on capital gains from “substantial shareholdings” held by companies.
Of course in Vodafone’s view, if MPs on the Public Accounts Committee wants to blame someone for the absence of revenues for the Exchequer from the eye-wateringly huge deal, they should direct their criticism at Gordon Brown, chancellor at the time.
That is another tax bonanza for Vodafone, on top of the sweetheart deal struck by David Hartnett of HMRC.
SME’s the target for HMRC
HMRC would rather collect the taxes it believes are due by collecting from SME accounts.
HM Revenue and Customs (HMRC) raked in GBP565m (USD905.4m) last year from its compliance investigations into small and medium sized businesses.
Figures analysed by accountancy firm UHY Hacker Young show that HMRC’s targeted investigations yielded 31 % more in additional revenue in 2012-13 than the £434M collected in 2011-12.
In his 2010 Spending Review, Chancellor George Osborne challenged HMRC to secure an extra £7bn a year in tax revenues from compliance activity. With an ambitious target set by the Chancellor to bring in billions of pounds through additional compliance, HMRC is desperate to squeeze as much money as they can from businesses who may owe tax.”
With far smaller budgets than larger businesses, SMEs are often less likely to have accountants to manage their finances, making them prone to mistakes when filling in returns and therefore an easy target for HMRC. That also means they are in a weaker position to negotiate over allegations of underpaid tax than a big business.
The media has focussed a great deal of attention on the tax affairs of large corporations. HMRC’s crackdown on SMEs has not attracted much attention. SMEs must therefore be especially “aware of the risks they face if their tax affairs are not in order, because SMEs are increasingly on HMRC’s radar – as the ever-growing yield from their activities proves.
“Everybody should pay their fair share of tax” George Osborne.
Talk is cheap as they say, but Osborne’s rhetoric is proving expensive for many of UK’s small business owners who are increasingly paying an unfair burden of tax while the rich and powerful get away almost scot free.
What is apparent is that by setting ambitious targets for an increasingly aggressive HMRC the Chancellor has achieved some success.
Why not put the same effort and amount of resources into reducing government spending and improving efficiency, surely that is in the UK’s best long term interest!
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