Firms are being warned to follow the rules to the absolute letter

Small businesses are being warned to keep the taxman informed of even the smallest changes, after a firm was threatened with a £30,000 fine over a technicality.

The advice comes from the Forum of Private Businesses, which has slammed HMRC over the fine, now reduced to £10,000, for not informing the revenue it had changed from a ‘partnership’ to a ‘ltd’ company.

The fine is being imposed despite the unnamed firm keeping the same VAT number and never having missed a tax payment.

The Forum's tax expert, Andrew Needham, of VAT Specialists says he is 'concerned' by what appears to be a change of HMRC's long-standing policy of waiving penalties in such circumstances.

He adds: “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.

“It is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated. But but 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.”

The forum is calling on other small businesses to contact them with their experiences with HMRC.