STAND up to the taxman. That is the advice of a York accountancy firm that managed to get the Inland Revenue to scrap nearly £7,000 from a penalty it had levied on a North Yorkshire pub landlady.

Accountants UHY Calvert Smith in the Mount, York, is being backed the awareness drive by an organisation representing 13,000 small businesses in Yorkshire.

Accountant Nevil Pearce said small businesses must battle if they believe they have overpaid tax.

Mr Pearce, who preferred to maintain the landlady's anonymity, said he had helped bring her financial affairs since 2001 up-to-date and found that not only had she overpaid money to the taxman, but had been charged massive penalties.

He said: "Many businesses are intimidated by the tax authorities and simply accept any penalties they're given. In this case we successfully reduced the payment demands by a massive £6,951 to just £1,200."

He said there was no argument the landlady was late in her payments, but she had been charged the maximum £60 penalty per day.

"Having got her affairs up-to-date we objected that these penalties were totally over the top, far exceeding her 'crime' of failing to submit her tax returns on time and Inland Revenue agreed. It really is a David versus Goliath situation, and it proves that decisions by the taxman can be battled by small businesses.

"Their decisions are not always set in stone. This case also shows how important it is to keep tax affairs up-to-date."

The pub landlady said: "My case shows that all small businesses, not just pubs can fight against decisions made by the taxman. I'm glad it's all over and I can get back to concentrating on pulling pints."

Chris Glen, policy chairman for the Yorkshire and Humber Federation of Small Businesses, said: "I am sure that this landlady would have preferred to have put in early returns, but it is so dauntingly complex, particularly for small business people, who also have to deal with the details of health and safety, planning law and other regulations.

"The Government expects us to be experts, and tax is particularly complicated."

Mr Glen, who is an independent financial adviser, agreed with Mr Pearce. "Don't take unfair tax demands lying down. Seek professional advice. At the end of the day, Inland Revenue officials are only public servants. If you do approach them, they tend to be helpful, but do it."

A spokeswoman for HM Revenue and Customs said: "People shouldn't have preconceptions about our attitudes and feel that they cannot challenge our decisions.

"They can approach us at any point throughout the tax year. You don't have to wait for tax return deadlines, and every individual case will be treated confidentially on its own merits. We have a national advice line at 0845 0109000."

Updated: 09:58 Friday, March 24, 2006