SMALL firms in Kirklees should ensure they can fight unfair tax demands in the courts, says a Huddersfield-based tax specialist.

Nick Brook, who runs TaxAssist Accountants at Lockwood, said the latest ruling from a VAT tribunal – which saved a bed & breakfast owner from a potentially crippling decision and set the ball rolling for similar cases – proved the value of having an HMRC fighting fund.

“Costs cannot be recovered from HMRC, even after an appeal has been won, so fee protection insurance is vital,” said Mr Brook. “Without it, it’s unlikely that this latest case would have been defended. With it, businesses can fight their corner, knowing that all the legal costs are met.

“HMRC continues to target small stand-alone businesses, with special task forces targeting cash businesses across Huddersfield, including private taxi firms, pubs, corner shops, takeaways and market traders for example.

“Huddersfield small business owners need to protect their legitimate and hard-earned income and make sure their accountants provide fee protection.”

In the latest VAT case, HMRC had demanded that under its rural diversification project, a small B&B run from a family farmhouse, which was well below the VAT-registration threshold, should be aggregated with the farm itself, which was a separate, VAT-registered business.

The tribunal found that the two businesses were separate, ensuring the B&B did not have to pay 20% of its income in VAT, increase its prices and become uncompetitive.