The new year is only a few days old and the issue of small business finance is already grabbing the headlines. HMRC is due to take a tougher line on small business tax inspection, a move that seemingly contradicts state SME policy and puts more emphasis on alternative SME lending products, such as invoice finance.

While there is evidence of growing optimism about 2012 among UK business leaders, some of it has no doubt been tempered by news that HMRC is planning to introduce a more stringent tax inspection scheme for small businesses from April. Under the new scheme, companies that fail to meet the new requirements face fines of up to £3,000, which is a financial hit that many may not be able to take.

The news will be a blow to the small business sector, which had finished 2011 on a positive note with the government announcing its SME loan scheme to help improve SME lending. Notably, the introduction of the new HMRC scheme flies in the face of government efforts to improve the availability of small business credit through the reduction of red tape.

So, how will small businesses react? Well, considering the sweetheart tax deals offered to the likes of Goldman Sachs and Vodafone, confidence in the government and its initiatives is likely to be significantly shaken. Hence, the move may push SMEs further down the road of alternative services in search of improved small business credit, such as invoice finance, which, as figures released at the end of 2011 show, is an SME lending facility that is proving increasingly popular.

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