Business News
Customs Clamp Down on Shoddy Admin
HM Revenue and Customs’ new campaign to clamp down on poor trading records, mutedly titled ‘Business Records Checks’ will roll out in the New Year, investigating small and medium sized businesses and penalising those keeping poor records and underpaying on tax.
Businesses can look forward to a slap on the wrist of up to £3,000 from everyone’s friend, The Taxman, in order to make an example of those making “significant record keeping failures,” according to the HRMC. Using existing powers, HRMC will wrestle with 50,000 of those deemed ‘the bad bunch’ from the latter half of 2011.
The penalties apply to a variety of areas within the administration, and for SME’s and entrepreneurs in particular, who have to keep records for capital gains tax, PAYE, income tax and VAT amongst others. This new campaign will add to what is already deemed “an administrative nightmare” with several penalties applying for each set of taxes; therefore a small business can fall foul of the rules in a number of areas.
“In my experience, some tax inspectors expect entrepreneurs and other business people to keep a set of books and records in textbook order. Some inspectors have little understanding of what life is like in the real business world where an entrepreneur or sole trader is responsible for production, sales, marketing, health and safety, etc., in addition to book-keeping and acting as unpaid PAYE and VAT collector.”
HMRC’s counterbalance to this kind of negativity is that there are benefits to keeping everything just so, including “improved chances of business success”, “improved financial management” and a “reduced likelihood of a subsequent compliance intervention, such as a full inquiry into their returns”. To appease and advise those businesses under the careful eye of The Taxman, they have stated that the scrutiny has no precise definition, but have put together guidelines for the inspectors on just how to snare the culprits;
• Untidy and unanalysed records, such as a box full of invoices, bank statements, cheque stubs etc, not supported by an analysis book such as ‘Simplex’
• Analysis books not completed regularly – a system whereby the books are written up more than four weeks after the event is not as reliable as books completed contemporaneously
• Cash books not written up in date order indicating that the books may have been written up from the bank statements
• Significant unanalysed and un-vouched round sums
HMRC advise: “Broadly speaking, businesses should keep records going back at least six years. For tax purposes, this includes invoices, bank statements, paying in books, details of purchases, expense details and so on.”
Anyone who makes a claim for the use of assets that they use personally as well as for the business – a computer being a typical example – must be scrupulous in allocating personal and business usage and have the necessary supporting paperwork to back up their claim. In essence, the Netbook bought to surf social networking sites and buy groceries online, may not actually be worth the hassle!
HMRC plan to launch a consultation on its plans that will conclude at the end of February, so take heed, and get in check!
