Probes by HM Revenue & Customs into the tax affairs of small businesses and the self-employed generated a relatively meagre £359million of additional tax in the last year.
The yield from small traders, which has been falling since 2007, was seized on as potential evidence that HMRC spends too much time on the sector for too little result.
When compared with four other avoidance areas, including corporation tax, the self-employed emerge as the least lucrative target for the Revenue's SME compliance unit.
The SME team's most successful year was in 2006-07, when £415m of extra tax was generated through enquiring into the tax returns of small firms and the self-employed.
That tax year also represents the best 12 months anytime since 2005, when HMRC was formed, for the collection of additional corporation tax from smaller traders.
But the yield from both types of probe has not recovered since 2007, despite the Revenue's "no mercy" attitude, said UHY Hacker Young, which obtained the figures.
The diminishing level of extra tax clawed from smaller outfits may suggest HMRC spends a "disproportionate amount of its resources" on the SME sector, the accountancy firm said.
And smaller businesses feel the burden of tax enquiries much more acutely than larger companies, who are HMRC's most lucrative target, said tax partner Roy Maugham.
He added: "Considering the relatively modest amounts of money that HMRC collects through self-assessment enquiries into SMEs, you have to ask whether smaller businesses really deserve all the scrutiny they receive.”
According to the figures, corporation tax enquiries into big businesses are the most profitable target for HMRC's compliance unit, returning £12.6bn of additional tax in the last four years.
And in spite of the declining yield from smaller traders, the Revenue's take from enquiries and other compliance work in the last tax year generated £12.1bn, representing a 64 per cent increase on the yield in 2005.
Tax advisors put the growth down to HMRC's tougher and more intrusive powers, such as the power to make arrests, to enter business premises unannounced and to demand confidential information on taxpayers from third parties.
May 10, 2010
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