Nearly Half a Million UK SMEs Missed Tax Deadlines – How Close Is Your Company to an HMRC Audit?
- TBA
- 10 hours ago
- 4 min read
Recent UK tax compliance data has sounded the alarm once again: in the past three years, nearly half a million small and medium-sized enterprises (SMEs) repeatedly missed tax deadlines, with as many as 19% admitting they delayed tax payments more than five times in just the past 12 months.
A combination of complex tax rules and cash flow pressures is dragging SME compliance levels down.
HMRC’s latest tax gap report shows that small businesses are the weakest performers when it comes to compliance, accounting for nearly 60% of unpaid taxes.
In addition, a survey by business finance provider Premium Credit revealed that out of 5.4 million SMEs in the UK, 9% missed deadlines for corporation tax, VAT, and other taxes over the past three years.
In response, the UK government has launched new measures, pledging £1.7 billion in funding for HMRC from 2025 to 2029. This will include 5,500 new compliance officers and 2,400 debt collection specialists, with a strong focus on tackling cross-border tax avoidance and deliberate evasion.
The three main taxes every UK company (UK SMEs) must understand
1. Corporation tax
All companies registered in the UK must pay corporation tax on their profits.
Companies with annual taxable profits below £50,000 pay 19%
Companies with taxable profits between £50,000 and £250,000 are subject to a marginal rate of 26.5%
Companies with taxable profits over £250,000 pay 25%
Banks are also required to pay a 3% bank surcharge, bringing their effective rate to 28%.
Corporation tax must be paid within nine months of the end of the accounting period, and the return (CT600) must be filed within 12 months.
2. Value Added Tax (VAT)
If a company’s taxable turnover exceeds £90,000 in any 12-month period, it must register for VAT.
The standard rate is 20% (covering most goods and services).
A reduced rate of 5% applies to items such as domestic fuel and power, while a zero rate applies to specific goods and services such as food, books, and medicines.
Note: For businesses involved in cross-border e-commerce, VAT compliance is particularly important.
From June 2025, online marketplaces are required to conduct in-depth verification of non-UK sellers, including proof of business location, VAT number validation, and device geolocation tracking across eight core checks. Platforms such as Amazon and eBay have already started compliance reviews, and sellers who fail will face account restrictions.
3. Employer National Insurance contributions (NICs)
If a company employs staff, it must operate PAYE to withhold and pay income tax and national insurance on behalf of employees, while filing and paying these to HMRC on time.
This ensures employees’ tax obligations are met. Failure to register or report on time can result in penalties, interest charges, and even HMRC investigations. Penalties depend on the length of non-compliance and the amount of tax unpaid.
In addition to these, UK companies may also be liable for business rates, stamp taxes, capital gains tax, withholding tax, and environmental taxes.
How can companies manage tax risks?
1. Build a solid compliance foundation: digitalisation and account separation
Integrating HMRC-approved digital systems is essential. Manual bookkeeping has become a weak spot for SMEs, with error rates 2.3 times higher than the industry baseline.
Under the Making Tax Digital (MTD) rules, all VAT-registered businesses must maintain digital records and submit returns through approved software.
It is also vital to separate business and personal accounts. Around 31% of tax gap cases arise from business owners mixing finances, which HMRC treats as a failure to take reasonable care.
2. Make use of tax reliefs: reduce liabilities legally while avoiding risks
This may include maximising R&D tax relief, making full use of capital gains tax allowances, and applying double tax treaties for cross-border business.
3. Establish risk alerts: prevention is better than cure
We recommend quarterly internal audits focusing on VAT compliance (checking invoices contain all mandatory details such as business name, VAT number, and goods descriptions, and ensuring reverse charge transactions record both input and output VAT), payroll accuracy, and cash flow management. It is also wise to set up a system for responding to HMRC enquiries quickly.
4. Professional support: TB Accountant’s protection framework
Given the complexity of the UK tax system, professional tax advice is no longer optional—it is essential for running a compliant business.
TB Accountants provide SMEs with comprehensive services, including:
Corporation tax compliance and planning
VAT registration and return management
Payroll and pensions administration
Tax health checks and risk diagnostics
HMRC investigations and dispute resolution
Why TB Accountants?
Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards.
Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones.
Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more.
Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation.
