The Forum of Private Business has urged entrepreneurs to keep HM Revenue & Customs up to date with any changes to their business, no matter how small.

The Forum of Private Business (FPB) has urged entrepreneurs to keep HM Revenue & Customs (HMRC) up to date with any changes to their business, no matter how small.

Its plea follows a report that one company is facing a £10,000 fine for not informing inspectors it had changed its name.

The business, which is said to have an 'exemplary record of VAT payments and submitting tax returns on time', was originally hit with a fine of over £30,000 under VAT notification liabilities contained in the Finance Act 1985 and later the VAT Act 1994.

A penalty was imposed after the business changed from a partnership to a limited company – adding a ‘ltd' to its name – without informing HMRC, despite it retaining the same VAT number and regardless of the fact that no tax payment were missed.

The fine has been reduced to just over £10,000 after intervention from accountants and the FBT's tax adviser Andrew Needham.

Says Needham, 'I am concerned that this is a change in HMRC's long-standing policy of waiving its technical ability to impose this penalty fine in such circumstances.

‘If this is carried through and sets a precedent it could result in huge fines being imposed on small businesses which, in reality, have done very little wrong.’

Needham adds that it is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated. ‘This heavy-handed approach is the very opposite of the support that is desperately needed at this difficult time and HMRC risks further alienating firms hit by its disproportionate, targeted business records checks regime and widely-reported poor levels of service.’

See also: Small firms warned to pay on time