UNDERSTANDING SME TAX EVASION

HMRC has published independent research which discusses the attitude of small and medium-sized businesses (SMBs) to tax evasion. The idea is to use data and intelligence to develop a system with built·in compliance to reduce the risk of expensive compliance interventions later on.

The research found five core attitudinal variables which appeared to differentiate
between types of tax evading businesses.

These included:
• An individual’s sense of citizenship – in other words, core values and beliefs that
are the basis for evasion behaviour.
• Distinction between personal and business assets.
• Perceived risk.
• Perceived financial imperative or reward.
• Willingness to seek out or create opportunities to evade.

These five variables interact with external factors such as social norms,
media noise and market pressures to determine four core types of evader:

unthinking evaders – those who evade low level tax through habit and probably
don’t think about it;

invested evaders who see it as an unfortunate financial necessity to stay in business;

lifestyle evaders who evade to be able to pay for an otherwise out·of·reach lifestyle; and

systematic evaders where evasion is actively considered and integral to the
business mode!.

If any of this rings bells with you, it is probably time to contact Nicholas Ridge CTA for an urgent reality check.