HM Revenue & Customs (HMRC) will target small retailers as they begin their crackdown on backhand cash payments, a report has revealed.
The tax authority will be analysing returns made by newsagents, restaurants and garages, and cross-checking them against the number of card payments they take.
Using a recent study which revealed that cash transactions account for a third of all purchases, it is believed that HMRC will investigate businesses who record more than 90 per cent of their transactions as paid for by card.
It will do this by passively monitoring credit card records of retailers to see if they match up with the profits they declare on their tax return. Retailers who top the 90 per cent threshold will be red flagged and investigated further.
However, experts believe the move could lead to lengthy and unnecessary investigations, which could be financially damaging for small businesses.
Chas Roy-Chowdhury, of the Association of Chartered Accountants (ACA), said the “Big Brother” approach is concerning.
“HMRC has made it clear it is not 100 per cent sure how good its data is. The taxman needs to be sure business owners don’t end up being wrongly vilified.”