Taxman is targeting tram works pay-outs to small firms

Published on Saturday 20 February 2010 10:16

THE taxman has been accused of putting tram-hit small businesses at risk by going after them for their compensation payments.

More than 400 traders claimed support payments of up to 4,000 each in 2008 under a scheme co-ordinated by Edinburgh Chamber of Commerce and tram firm TIE to compensate for the disruption caused by the project.

It has now emerged that TIE has written to the businesses concerned after HM Revenue and Customs requested details of the windfalls.

Edinburgh Chamber of Commerce urged HMRC to show leniency, criticising the taxman for showing a "predatory instinct towards businesses under very difficult circumstances".

Traders in Leith, who received the majority of the payments, said the move risked "further eroding" the benefit of the payments.

A total of 427 businesses claimed the business support payments of up to 4,000 each, with nearly three quarters of the money going to traders on Leith Walk – a total of 1.1 million. West End businesses claimed 384,000, while those in the city centre took a total of 47,000 as part of the Open for Business initiative.

HMRC today refused to comment, but TIE said it had contacted every business which received money to inform them that their details had been requested by tax bosses.

Graham Birse, deputy chief executive of Edinburgh Chamber of Commerce, said: "Clearly, all businesses have responsibility to pay their dues in terms of taxation. That said, HMRC are showing a very strong predatory instinct towards businesses under very difficult circumstances.

"We would urge HMRC to try to take into account the specific circumstances of a reduction in footfall, the recession and the effects of the tram works.

"In the case of very small businesses, it's not too dramatic to say this could place them in difficulty by taking up the last drop of revenue available to them."

Alan Rudland, chairman of the Leith Business Association, said: "We need to see if the council can cast any more light on this, whether TIE actually looked at the tax implications and whether the payments would be subject to corporation tax.

"We have been left somewhat in the dark about this. My own businesses treated it as an injection of capital, but HMRC may treat it as income and therefore subject to tax."

TIE said it had never suggested the money had been tax-free and said it had been up to individual businesses to seek advice from their accountants.

Mandy Haeburn-Little, director of customer services and communications at the tram project, said: "This was a scheme that was clearly targeted at supporting small business owners who were experiencing disruption due to tram construction.

"Whilst taxation is solely a matter between HMRC and the individual businesses, we would hope that it is recognised that the Business Support Scheme was aimed at assisting businesses. We continue to work closely with all individual businesses and local organisations to provide whatever support is possible during the construction of the trams."

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